Document:

VERTICAL COMPUTER SYSTEMS, INC.

                           RESTRICTED STOCK AGREEMENT

                                  CONFIDENTIAL

      THIS RESTRICTED STOCK AGREEMENT (the "Agreement") is made and entered into
on  ____________,  20__,  by and between,  [NAME OF  INDIVIDUAL],  an individual
residing at [ADDRESS OF  INDIVIDUAL]  (the  "Employee")  and  Vertical  Computer
Systems,  Inc., a Delaware corporation,  located at 201 Main Street, Suite 1175,
Fort Worth, TX 76102 ("Vertical").

                              W I T N E S S E T H:
                              - - - - - - - - - -

      WHEREAS,  Vertical  desires to provide  the  Employee  an  incentive  with
respect to the Employee's employment [with its subsidiary,  Now Solutions,  Inc.
and their subsidiaries ("Now Solutions")], and to promote the growth and success
of Vertical  and  [its/Now  Solutions  and their]  subsidiaries  by awarding the
Employee a restricted stock award pursuant to the terms of this Agreement.

      NOW,  THEREFORE,  for and in  consideration  of the  mutual  promises  and
covenants  and the  considerations  as set forth  herein,  the parties do hereby
agree as follows:

                                    ARTICLE 1
                                 AWARD OF SHARES

1.1. Grant.  For and in consideration of services to be rendered by the Employee
to [Vertical/Now Solutions] and other valuable consideration, Vertical agrees to
grant and  issue  and does  hereby  grant  and  issue to the  Employee,  and the
Employee agrees to accept and does hereby accept from Vertical,  effective as of
the date of this  Agreement  (the  "Date of  Grant") a  restricted  stock  award
consisting of ________________ shares of common stock in Vertical (the "Shares")
pursuant to the terms and conditions and subject to the restrictions hereinafter
set forth.

1.2  Confidentiality.  As a condition of the grant of Shares in this  Agreement,
Employee  shall  keep  the  terms of this  Agreement  and the  award  of  Shares
confidential.  Employee  shall not disclose  the terms of this  Agreement or the
award of shares to any third party,  including  any  employees of Vertical,  Now
Solutions  or  any  their  subsidiaries  and  affiliates.   Notwithstanding  the
foregoing,  Employee may disclose or discuss the terms of this  Agreement to (a)
the President or CEO of Vertical,  (b) the Chief Financial  Officer of Vertical,
(c) Vertical's  independent auditors, (d) Employee's accountant for tax purposes
or to its personal legal counsel,  provided such  individuals or entities agrees
to keep the terms of this Agreement and the award of the Shares confidential, or
(e) to the  extent  required  by  applicable  law;  provided,  however,  that if
Employee is  required  in any legal  proceeding,  regulatory  proceeding  or any
similar  process to disclose any part of the terms of this  Agreement,  Employee
shall give prompt  notice of such request to Vertical so that  Vertical may seek
an appropriate protective action.

1.3  Vesting of Shares.  The Shares  that have  become  vested  pursuant to this
Section 1.2 are herein  referred to as the "Vested  Shares" and all Shares which
are not vested are herein referred to as the "Unvested Shares."

      (a) Subject to the  restrictions  and  conditions in this  Agreement,  the
Shares shall vest in accordance with the following schedule:

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                  (1) First installment.  ________________________  of the total
Shares on the 1st anniversary of the Date as of the Date of Grant, provided that
the Employee is employed by  [Vertical/Now  Solutions] or providing  services to
[Vertical/Now Solutions] on the 1st anniversary of the Date of Grant.

                  (2) Second  installment.  An  ________________________  of the
total Shares on the second (2nd) anniversary of the Date of Grant, provided that
the Employee is still employed by [Vertical/Now Solutions] or providing services
to [Vertical/Now Solutions] on such second (2nd) anniversary.

                  (3) Third installment. An additional  ________________________
of the  total  Shares  on the  third  (3rd)  anniversary  of the Date of  Grant,
provided  that the Employee is still  employed by  [Vertical/Now  Solutions]  or
providing services to [Vertical/Now Solutions] on such third (3rd) anniversary.

      (b) In the event the Employee's services terminate as set forth below, the
Shares will vest as follows:

                  (1) If the Employee is unable to perform the Employee's duties
in  connection  with the  Employee's  employment  due to due to partial or total
disability or incapacity resulting from a mental or physical illness,  injury or
any other cause for a period of ten (10)  consecutive  weeks or for a cumulative
period  of  seventy  (70)  business  days  during  any  five  (5)  month  period
("Disability"),  or due to death,  a  pro-rata  number of Shares  applied to the
applicable installment(s) will vest for a period of twelve (12) months after the
date of termination of Employee's  services or the date of termination  due to a
Disability.

                  (2)  If  the   Employee  is   terminated   without   cause  by
[Vertical/[Vertical/Now  Solutions]], a pro-rata portion of the number of Shares
applied to the  applicable  installment(s)  will vest  through a period  that is
sixty (60) days after the date of termination of employment.

1.4 Term;  Forfeiture.  Upon any  forfeiture,  all rights of the  Employee  with
respect to the forfeited Unvested Shares shall cease and terminate,  without any
further  obligation on the part of Vertical and ownership of the Unvested Shares
shall be transferred back to Vertical. Any Unvested Shares shall be forfeited on
the first to occur of the following:

      (a) 5 p.m. on the date which is twelve (12) months  following  the date of
the  Employee's  termination  of employment by  [Vertical/Now  Solutions] due to
death or Disability.

      (b) 5 p.m. on the date of the  Employee's  termination  of  employment  by
[Vertical/Now Solutions] for Cause;

      (c) 5 p.m. on the date which is sixty (60) days  following the  Employee's
termination  of employment  for any reason other than death  Disability,  or for
Cause.

      (d) 5 p.m. on the date which is the date of the Employee's  termination of
employment in the case where the Employee resigns.

For  purposes  of  this  Section  1.3,  "Cause"  shall  mean  (i)  frequent  and
unjustifiable absenteeism, other than solely by reason of the Employee's illness
or  physical  or  mental  disability;  (ii)  insubordination  or the  Employee's
continued  violation  of the  Employee's  obligation  to perform  the duties and
responsibilities normally required of the Employee's position, which are willful
or grossly negligent,  after the Employee has been given written notice from the
Employee's  supervisor  describing the  Employee's  violations and has failed to
cure or commence to cure such violations  within thirty (30) days; (iii) failing
to follow the reasonable  instructions of the Employee's supervisor;  and (iv) a
willful act of  embezzlement  or  dishonesty  which is  materially  injurious to
Vertical or Now Solutions or any affiliate of Vertical or Now Solutions.

RSA Agreement                        - 2 -
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1.5 Shares Held by the  Custodian.  The Employee  hereby  authorizes and directs
Vertical to deliver any  certificates  issued by Vertical to evidence the Shares
to the President of Vertical (the "Custodian") to be held by the Custodian until
the Shares become Vested Shares.  the Employee hereby  irrevocably  appoints the
Custodian, and any successor thereto, as the true and lawful attorney-in-fact of
the Employee  with full power and  authority  to execute any  transfer  power or
other  instrument  necessary to transfer  the Shares to  Vertical,  in the name,
place and  stead of the  Employee,  if the  Shares  do not vest as  provided  in
Section 1.2 above.

1.6 No Rights to  Distributions.  The  Employee  shall  not be  entitled  to any
dividends paid or declared on Unvested Shares for which the record date is prior
to the vesting of the Shares as provided in Section 1.2 above.

                                    ARTICLE 2
                             RESTRICTIONS ON SHARES

2.1.  Restrictions  on Unvested  Shares.  No portion of the Restricted  Stock or
rights  granted  hereunder  may  be  sold,  transferred,  assigned,  pledged  or
otherwise  encumbered  or disposed of by the  Employee  for any reason or in any
manner,  including  by will or intestacy  until such  portion of the  Restricted
Stock  becomes  vested in  accordance  with Section 1.2 of this  Agreement.  The
period of time between the date hereof and the date all Restricted Stock becomes
vested is referred to herein as the "Restriction  Period." Unvested Shares shall
not be transferable by the Employee.

2.2.  Restrictions  on Vested  Shares.  Vested  Shares  shall be  subject to the
provisions, including all restrictions on transfer, set forth in this Agreement,
including without limitation,  any restrictive legends as set forth on the share
certificate, and any State or Federal regulations, including Rule 144.

                                    ARTICLE 3
                               GENERAL PROVISIONS

3.1. Legends. Any certificate representing the Shares shall be endorsed with the
following  legend or a legend with similar language as determined by Vertical in
its sole and absolute  discretion.  the Employee  shall not make any transfer of
the Shares without first complying with the  restrictions on transfer  described
in such legend:

                             TRANSFER IS RESTRICTED

THE SHARES  REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN AGREEMENT  BETWEEN
THE  CORPORATION  AND THE REGISTERED  HOLDER,  A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL  OFFICE OF THIS  CORPORATION  AND HAVE NOT BEEN  REGISTERED  UNDER THE
SECURITIES  ACT OF 1933, AS AMENDED AND MAY NOT BE SOLD OR  TRANSFERRED  WITHOUT
REGISTRATION UNDER SAID ACT OR AN EXEMPTION THEREFROM.

The Employee agrees that Vertical may also endorse any other legends required by
applicable  federal  or state  securities  law.  Vertical  need not  register  a
transfer of the Shares and may also instruct its transfer  agent, if any, not to
register  the  transfer of the Shares  unless the  conditions  specified  in the
foregoing legends are satisfied.

RSA Agreement                        - 3 -
<PAGE>

3.2 Employee  Shareholder  Rights.  During the Restriction  Period, the Employee
shall have all the rights of a shareholder  with respect to the Restricted Stock
except for the right to transfer the Restricted Stock, as set forth in Article 2
of this  Agreement.  Accordingly,  the Employee shall have the right to vote the
Restricted  Stock and to receive any cash dividends paid to or made with respect
to the Restricted Stock,  provided,  however,  that dividends paid, if any, with
respect  to that  Restricted  Stock  which  has not  vested  at the  time of the
dividend  payment  shall be held in the custody of Vertical and shall be subject
to the same restrictions that apply to the corresponding Restricted Stock.

3.3 Changes in Stock.

      (a) Except as set forth in  subsection  (b), in the event that as a result
of (i)  any  stock  dividend,  forward  stock  split,  or  other  change  in the
Restricted  Stock, or (ii) any merger or sale of all or substantially all of the
assets or other  acquisition  of Vertical and by virtue of any such change,  the
Employee  shall  in the  Employee's  capacity  as owner of  unvested  shares  of
Restricted  Stock which have been awarded to the Employee (the "Prior Stock") be
entitled to new or additional  or different  shares or  securities,  such new or
additional or different shares or securities shall thereupon be considered to be
unvested  Restricted  Stock and shall be  subject to all of the  conditions  and
restrictions  which  were  applicable  to  the  Prior  Stock  pursuant  to  this
Agreement.

      (b) In the event  Vertical  shall  combine the  outstanding  shares into a
smaller  number of shares in connection  with a reverse  stock split,  the Prior
Shares shall be proportionately decreased,  effective at the opening of business
on the full business day next following the day such action becomes effective.

3.4  Employee  Representation.  The  Employee  expressly  acknowledges  that the
Employee has not been induced to enter into this Agreement by the expectation of
employment or continued employment with New Solutions,  Inc. nor with any of its
subsidiaries (including New Solutions (Canada) Inc).

3.5. No Employment  Rights Created.  The award of Shares  hereunder shall not be
construed as granting Employee right to continue or extend Employee's employment
(if any)  with  [Vertical/Now  Solutions]  or as  interfering  with the right of
[Vertical/Now  Solutions]' to terminate the employment of Employee.  The parties
agree  that  [neither  Now  Solutions  nor ]  Vertical  shall  have  no  further
obligations to Employee relating to the grant of stock except as stated herein.

3.6 Notices. Notices and all other communications contemplated by this Agreement
shall be in writing and shall be deemed to have been duly given when  personally
delivered  or when mailed by overnight  courier,  U.S.  registered  or certified
mail, return receipt requested and postage prepaid. In the case of the Employee,
mailed  notices  shall be  addressed  to the  Employee  at the address set forth
above.  In the  case of  Vertical,  mailed  notices  shall be  addressed  to its
corporate  headquarters,  and all notices  shall be directed to the attention of
the  President.  Each  notice,  request,  claim,  demand or other  communication
delivered  or sent in the manner  described  above shall be deemed  sufficiently
delivered  or sent at such time as it is delivered  to the  addressee  (with the
return  receipt  deemed  exclusive  evidence of such receipt) or at such time as
delivery is refused by the addressee.

RSA Agreement                        - 4 -
<PAGE>

3.7 Authority.  Each party hereto represents and warrants that it has full power
and  authority to enter into this  Agreement  and to perform  this  Agreement in
accordance with its terms.

3.8 Governing Law. Without  reference to its conflict of laws  provisions,  this
Agreement  shall be construed,  interpreted  and enforced in accordance with the
laws of the State of Texas and the Federal and State  courts of Texas shall have
exclusive jurisdiction with respect to any dispute arising herein subject to any
local legislation which may apply to the Employee's employment in which case the
said legislation shall apply only with reference to the matter governed therein,
and shall not in any other way affect the  governing law of the Agreement or the
provisions  hereof.  The parties  irrevocably  waive any objection to such venue
based on forum  nonconveniens or similar principle with respect to the exclusive
jurisdiction of the Federal and State courts of Texas.

3.9  Successors  and  Assigns.  The rights,  duties and  obligations  of a party
hereunder  may not be assigned,  delegated or assumed  without the prior written
consent of the other party,  and any such  assignment  shall be void and without
effect, provided that Vertical may assign this Agreement to any successor entity
or  acquiring  entity of  Vertical  if the  context  so  requires,  without  the
Employee's  consent,  and such assignment  shall not constitute a termination of
the Employee's employment hereunder. Nothing herein shall cause a termination of
this Agreement upon the acquisition, reorganization, or merger of Vertical. This
Agreement  shall be binding  upon and shall  inure to the benefit of the parties
hereto and each party's  respective  successors  or permitted  assigns.  Nothing
herein  shall be  construed  to confer  upon any person  not a party  hereto any
right, remedy or claim under or by reason of this Agreement.

3.10 Headings and Pronouns.  The headings of the sections of this  Agreement are
for  convenience  of  reference  only and in no way define,  limit or affect the
scope or  substance  of any  section of this  Agreement.  All  pronouns  and any
variations thereof shall be deemed to refer to the masculine,  feminine, neuter,
singular or plural as the  identity of the  entities or persons  referred to any
require.

3.11 Waiver.  No waiver of any breach of any term or provision of this Agreement
shall be  construed  to be, or shall  be, a waiver  of any other  breach of this
Agreement. No waiver shall be binding unless recognized in writing and signed by
the President or the Board.

3.12 Counterparts.  This Agreement may be executed in several counterparts, each
of which shall be an original,  but all of which together  shall  constitute one
and the same  agreement.  It is not necessary that each party hereto execute the
same counterpart.

3.13 Severability. If any provision of this Agreement shall be determined, under
applicable law, to be overly broad in duration,  substantive scope or otherwise,
such  provision  shall be deemed  narrowed to the  broadest  terms  permitted by
applicable  law and shall be enforced as so narrowed.  If any  provision of this
Agreement is nevertheless held invalid, void, or enforceable for any reason, the
remaining  provisions will nevertheless  continue in full force and effect as if
the invalid,  void, or unenforceable  provision had never been contained in this
Agreement  and  the  validity,  legality  and  enforceability  of the  remaining
provisions  shall  remain  in full  force  and  effect  and  shall  in no way be
affected, impaired or invalidated..

3.14  Amendment.  This Agreement may be amended only in writing  executed by the
Employee and an authorized representative of Vertical.

RSA Agreement                        - 5 -
<PAGE>

3.15  Finality of  Agreement.  This  Agreement,  when  executed by the  parties,
supersedes all other  understandings  and agreements of the parties with respect
to the matters set forth herein.

3.16 Independent  Counsel. The Employee represents and warrants to Vertical that
the  Employee  was  advised to consult  with  independent  legal  counsel of the
Employee's own choosing  concerning this Agreement and that Executive has either
done so or has had a reasonable  opportunity to do so and has chosen not to seek
independent legal counsel.

      IN WITNESS  WHEREOF,  the  parties  have  executed  this  Agreement  to be
effective as of the day and year first set forth above.

                                       VERTICAL COMPUTER SYSTEMS, INC.

                                       By:
                                           --------------------------------
                                           [NAME OF AUTHORIZED AGENT]
                                           [TITLE OF AUTHORIZED AGENT]

Accepted and agreed:

Employee

By:
    ---------------------------------
Name: [NAME OF EMPLOYEE]

RSA Agreement                        - 6 -VERTICAL COMPUTER SYSTEMS, INC.
                            (a Delaware Corporation)

                                STOCK OPTION PLAN

                                December 15, 1999

1.    PURPOSE OF PLAN; ADMINISTRATION

      1.    Purpose

      The Vertical  Computer  Systems,  Inc. Stock Option Plan  (hereinafter the
"Plan"),is  hereby  established  to grant to  officers  and other  employees  of
Vertical Computer Systems,  Inc., a Delaware  corporation (the "Company") or its
parents or subsidiaries (as defined in Sections 424(e) and (f), respectively, of
the Internal  Revenue Code of 1986,  as amended  (the  "Code")),  if any, and to
non-employee  directors,  consultants  and  advisors  and other  persons who may
perform  significant  services  for or on behalf  of the  Company,  a  favorable
opportunity to acquire common stock,  $.001 par value ("Common  Stock"),  of the
Company and,  thereby,  to create an incentive for such persons to remain in the
employ of or provide services to the Company and to contribute to its success.

      The Company may grant under the Plan both  incentive  stock options within
the meaning of Section 422 of the Code  ("Incentive  Stock  Options")  and stock
options  that  do  not  qualify  for   treatment  as  Incentive   Stock  Options
("Nonstatutory Options").  Unless expressly provided to the contrary herein, all
references  herein to "options,"  shall include both incentive Stock Options and
Nonstatutory Options.

      1.2   Administration

      The Plan shall be  administered  by the Board of  Directors of the Company
(the  "Board"  or  "Committee"),  or a  committee  of  two  or  more  directors.
Appointment  of  Committee   members  shall  be  effective  upon  acceptance  of
appointment.  Committee  members  may resign at any time by  delivering  written
notice to the Board. Vacancies in the Committee may be filled by the Board.

      A majority of the members of the Committee  shall  constitute a quorum for
the purposes of the Plan.  Provided a quorum is present,  the Committee may take
action by affirmative  vote or consent of a majority of its members present at a
meeting.  Meetings may be held telephonically as long as all members are able to
hear one another,  and a member of the  Committee  shall be deemed to be present
for this purpose if he or she is in simultaneous communication by telephone with
the  other  members  who are able to hear one  another.  In lieu of  action at a
meeting, the Committee may act by written consent of a majority of its members.

      Subject to the express  provisions of the Plan,  the Committee  shall have
the authority to construe and interpret the Plan and all Stock Option Agreements
(as defined in Section 3.4) entered into pursuant hereto and to define the terms
used therein,  to  prescribe,  adopt,  amend and rescind  rules and  regulations
relating to the administration of the Plan and to make all other  determinations
necessary or advisable for the  administration  ofthe Plan;  provided,  however,
that the Committee may delegate  nondiscretionary  administrative duties to such
employees of the Company as it deems  proper;  and,  provided,  further.  in its
absolute  discretion,  the Board may at any time and from time to time  exercise
any and all rights and duties of the  Committee  under the Plan.  Subject to the
express  limitations of the Plan, the Committee  shall designate the individuals
from among the class of persons  eligible to  participate as provided in Section
1.3 who shall receive options,  whether an optionee will receive Incentive Stock
Options or Nonstatutory  Options, or both, and the amount,  price,  restrictions
and  all  other  terms  and  provisions  of  such  options  (which  need  not be
identical).

<PAGE>

      Members  of the  Committee  shall  receive  such  compensation  for  their
services  as  members  as may be  determined  by the  Board.  All  expenses  and
liabilities  which  members  of the  Committee  incur  in  connection  with  the
administration  of this Plan shall be borne by the Company.  The Committee  may,
with the  approval of the Board,  employ  attorneys,  consultants,  accountants,
appraisers,  brokers  or other  persons.  The  Committee,  the  Company  and the
Company's  officers  and  directors  shall be  entitled to rely upon the advice,
opinions or valuations  of any such persons.  No members of the Committee or the
Board shall be personally liable for any action, determination or interpretation
made in good faith with  respect to the Plan,  and all members of the  Committee
shall  be  fully  protected  by the  Company  in  respect  of any  such  action,
determination or interpretation.

      1.3   Participation

      Officers  and other  employees  of the  Company,  non-employee  directors,
consultants and advisors and other persons who may perform significant  services
on behalf of the Company shall be eligible for selection to  participate  in the
Plan upon approval by the Committee;  provided,  however,  that only "employees"
(within  the  meaning of Section  3401(c) of the Code) of the  Company  shall be
eligible for the grant of Incentive  Stock  Options.  An individual who has been
granted an option may, if otherwise  eligible,  be granted additional options if
the Committee  shall so determine.  No person is eligible to  participate in the
Plan by matter of right;  only those  eligible  persons who are  selected by the
Committee in its discretion shall participate in the Plan.

      1.4   Stock Subject to the Plan.

      Subject to  adjustment as provided in Section 3.5, the stock to be offered
tinder  the Plan  shall be  shares  of  authorized  by  unissued  Common  Stock,
including any shares repurchased under the terms of the Plan or any Stock Option
Agreement  entered into  pursuant  hereto.  The  cumulative  number of shares of
Common Stock to be issued under the Plan shall not exceed  2,500,000  subject to
adjustment as set forth in Section 3.5.

      If any option granted  hereunder  shall expire or terminate for any reason
without having been fully  exercised,  the  unpurchased  shares subject  thereto
shall again be  available  for the  purposes  ofthe Plan.  For  purposes of this
Section  1.4,  where  the  exercise  price  of  options  is paid by means of the
grantee's  surrender of previously  owned shares of Common  Stock,  only the net
number of additional  shares of Common Stock,  only the net number of additional
shares  issued and which remain  outstanding  in  connection  with such exercise
shall be deemed "issued" for purposes of the Plan.

<PAGE>

2.    STOCK OPTIONS

      2.1   Exercise Price; Payment.

      (a) The exercise  price of each  Incentive  Stock Option granted under the
Plan shall be  determined by the  Committee,  but shall not be less than 100% of
the "Fair Market Value" (as defined below) of Common Stock on the date of grant.
If an  Incentive  Stock  Option is granted to an  employee  who at the time such
option is granted owns  (within the meaning of section  424(d) of the Code) more
than 10% of the total  combined  voting power of all classes of capital stock of
the Company, the option exercise price shall be at least 110% of the Fair Market
Value  of  Common  Stock  on the  date of  grant.  The  exercise  price  of each
Nonstatutory Option also shall be determined by the Committee,  but shall not be
less than 85% of the Fair Market Value of Common Stock on the date of grant. The
status of each option granted under the Plan as either an Incentive Stock Option
or a  Nonstatutory  Option shall be  determined by the Committee at the time the
Committee acts to grant the option,  and shall be clearly  identified as such in
the Stock Option Agreement relating thereto.

      "Fair Market  Value" for purposes of the Plan shall mean:  (i) the closing
price of a share of Common  Stock on the  principal  exchange on which shares of
Common Stock are then trading, if any, on the day immediately preceding the date
of grant, or, if shares were not traded on the day preceding such date of grant,
then on the next preceding trading day during which a sale occurred;  or (ii) if
Common Stock is not traded on as exchange but is quoted on Nasdaq or a successor
quotation  system,  (1) the last sales price (if Common  Stock is then listed on
the Nasdaq Stock Market) or (2) the mean between the closing  representative bid
and asked  price (in all other  cases) for Common  Stock on the day prior to the
date of grant as reported by Nasdaq or such successor  quotation system or (iii)
if there is no listing or trading of Common Stock either on a national  exchange
or over-the-counter,  that price determined in good faith by the Committee to be
the fair value per share of Common  Stock,  based upon such evidence as it deems
necessary or advisable.

      (b)  In the  discretion  of  the  Committee  at the  time  the  option  is
exercised, the exercise price of any option granted under the Plan shall be paid
in full in cash, by check or by the optionee's  interest-bearing promissory note
(subject to any limitations of applicable state  corporations  law) delivered at
the time of exercise; provided, however, that subject to the timing requirements
of Section  2.7, in the  discretion  of the  Committee  and upon  receipt of all
regulatory approvals, the person exercising the option may deliver as payment in
whole or in part of such  exercise  price  certificates  for Common Stock of the
Company (duly endorsed or with duly endorsed stock powers attached), which shall
be valued at its Fair Market  Value on the day of  exercise  fo the  option,  or
other property deemed appropriate by the Committee;  and, provided further, that
subject to Section 422 of the Code,  so-called  cashless  exercises as permitted
under applicable rules and regulations of the Securities and Exchange Commission
and the  Federal  Reserve  Board shall be  permitted  in the  discretion  of the
Committee.   Without  limiting  the  Committee's   discretion  in  this  regard,
consecutive book entry  stock-for-stock  exercises of options (or  "pyramiding")
also are permitted in the Committee's discretion.

<PAGE>

      Irrespective of the form of payment,  the delivery of shares issuable upon
the exercise of an option shall be  conditioned  upon payment by the optionee to
the  Company of amounts  sufficient  to enable the  Company to pay all  federal,
state, and local  withholding taxes resulting in, the Company's  judgment,  from
the exercise.  In the discretion of the  Committee,  such payment to the Company
may be effected through (i) the Company's  withholding from the number of shares
of Common Stock that would otherwise be delivered to the optionee by the Company
on exercise of the option a number of shares of Common  Stock equal in value (as
determined by the Fair Market Value of Common Stock on the date of the exercise)
to the aggregate  withholding taxes, (ii) payment by the optionee to the Company
of the aggregate  withholding  taxes in cash,  (iii)  withholding by the Company
from other amounts  contemporaneously  owed by the Company to the  optionee,  or
(iv) any  combination of these three methods,  as determined by the Committee in
its discretion.

      2.2   Option Period.

      (a) The  Committee  shall  provide,  in the  terms  of each  Stock  Option
Agreement,  when the  option  subject  to such  agreement  expires  and  becomes
unexercisable,  but in no event will an Incentive Stock Option granted under the
Plan be exercisable  after the expiration  often years from the date is granted.
Without  limiting the generality of the foregoing,  the Committee may provide in
the Stock  Option  Agreement  that the option  subject  thereto  expires 30 days
following a Termination of Employment (as defined in Section 3.2 hereof) for any
reason other than death or disability,  or six months following a Termination of
Employment for disability or following an optionee's death.

      (b) Outside Date for  Exercise.  Notwithstanding  any  provisions  of this
Section  2.2, in no event shall any option  granted  under the Plan be exercised
after the  expiration  date of such  option  set forth in the  applicable  Stock
Option Agreement.

      2.3   Exercise of Options.

      Each option granted under the Plan shall become  exercisable and the total
number of shares subject thereto shall be purchaseable, in a lump sum or in such
installments,  whichneed  not  be  equal,  as  the  Committee  shall  determine;
provided,  however,  that each option shall become  exercisable in full no later
than ten years  after such  option is  granted,  and each  option  shall  become
exercisable as to at least 10% of the shares of Common Stock covered  thereby on
each anniversary of the date such option is granted; and provided, further, that
if the holder of an option shall not in any given  installment  period  purchase
all of the shares which such holder is entitled to purchase in such  installment
period,  such  holder's  right to  purchase  any  share  not  purchased  in such
installment  period shall continue until the expiration or sooner termination of
such holder's  option.  The Committee may, at any time after grant of the option
and from  time to  time,  increase  the  number  of  shares  purchasable  in any
installment, subject to the total number of shares subject to the option and the
limitations set forth in Section 2.5. At any time and from time to time prior to
the time when any  exercisable  option or exercisable  portion  thereof  becomes
unexercisable  under the Plan or the  applicable  Stock Option  Agreement,  such
option,  or  portion  thereof  may be  exercised  in whol or in part;  provided,
however, that the Committee may, by the terms of the option, require any partial
exercise to be with respect to a specified  minimum number of shares.  No option
or installment thereof shall be exercisable except with respect to whole shares.
Fractional  share  interests  shall  be  disregarded,  except  that  they may be
accumulated  as  provided  above  and  except  that if such a  fractional  share
interest  constitutes  the  total the total  shares  of Common  Stock  remaining
available  for purchase  under an option at the time of  exercise,  the optionee
shall be entitled to receive on exercise a certified or bank cashier's  check in
an amount equal to the Fair Market Value of such fractional share of stock.

<PAGE>

      2.4   Transferability of Options.

      Except as the  Committee may  determine as  aforesaid,  an option  granted
under the Plan shall,  by its terms,  be  nontransferable  by the optionee other
than by will or the laws of descent and distribution, or pursuant to a qualified
domestic  relations  order (as  defined by the Code),  and shall be  exercisable
during the optionee's lifetime only by the optionee or by his or her guardian or
legal representative.  More particularly, but without limiting the generality of
the immediately preceding sentence,  an option may not be assigned,  transferred
(except as provided in the preceding sentence), pledged or hypothecated (whether
by  operation  of law or  otherwise),  and shall not be  subject  to  execution,
attachment or similar  process.  Any  attempted  assignment,  transfer,  pledge,
hypothecation  or other  disposition of any option contrary to the provisions of
the  Plan  and the  applicable  Stock  Option  Agreement,  and  any  levy of any
attachment  or  similar  process  upon an  option,  shall be null and void,  and
otherwise  without effect,  and the Committee may, in its sole discretion,  upon
the happening of any such event, terminate such option forthwith.

      2.5   Limitation on Exercise of Incentive Stock Options.

      To the extent that the aggregate Fair Market Value (determined on the date
of grant as provided in Section 2.1 above) of the Common  Stock with  respect to
which  Incentive  Stock  Options  granted  hereunder  (together  with all  other
Incentive  Stock Option plans of the Company) are exercisable for the first time
by an  optionee  in any  calendar  year under the Plan  exceeds  $100,000,  such
options granted hereunder shall be treated as Nonstatutory Options to the extent
required  by  Section  422 of the  Code.  The  rule set  forth in the  preceding
sentence  shall be applied by taking  options into account in the order in which
they were granted.

      2.6   Disqualifying Dispositions of Incentive Stock Options.

      If Common Stock  acquired upon  exercise of any Incentive  Stock Option is
disposed of in a disposition  that, under Section 422 of the Code,  disqualifies
the option  holder  from the  application  of  Section 42 1(a) of the Code,  the
holder of the Common Stock immediately  before the disposition shall comply with
any requirements imposed by the Company in order to enable the Company to secure
the related income tax deduction to which it is entitled in such event.

<PAGE>

      2.7   Certain Timing Requirements.

      At the discretion of the Committee, shares of Common Stock issuable to the
optionee upon  exercise of an option may be used to satisfy the option  exercise
price  or the tax  withholding  consequences  of such  exercise,  in the case of
persons  subject  to  Section  16 of the  Securities  Exchange  Act of 1934,  as
amended,  only (i)  during  the  period  beginning  on the  third  business  day
following  the date of release of the quarterly or annual  summary  statement of
sales and  earnings  of the  company  and  ending on the  twelfth  business  day
following such date or (ii) pursuant to an irrevocable  written  election by the
optionee to use shares of Common Stock issuable to the optionee upon exercise of
the option to pay all or part of the option price or the withholding  taxes made
at least six months prior to the payment of such option price or the withholding
taxes made at least six months  prior to the  payment  of such  option  price or
withholding taxes.

      2.8   No Effect on Employment.

      Nothing  in the Plan or in any  Stock  Option  Agreement  hereunder  shall
confer upon any optionee any right to continue in the employ of the Company, any
Parent  Corporate or any  subsidiary or shall  interfere with or restrict in any
way the rights of the  Company,  its Parent  Corporation  and its  Subsidiaries,
which are hereby expressly  reserved,  to discharge any optionee at any time for
any reason whatsoever, with or without cause.

      For purposes of the Plan, "Parent  Corporation" shall mean any corporation
in an  unbroken  chain of  corporations  ending  with the Company if each of the
corporations  other than the Company then owns stock  possessing  50% or more of
the total  combined  voting  power of all  classes  of stock in one of the other
corporations in such chain.  For purposes of the Plan,  "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% or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.

3.    OTHER PROVISIONS

      3.1   Sick Leave and Leaves of Absence

      Unless otherwise provided in the Stock Option Agreement, and to the extent
permitted  by Section 422 of the Code,  an  optionee's  employment  shall not be
deemed to  terminate by reason of sick leave,  military  leave or other leave of
absence  approved by the Company if the period of any such leave does not exceed
a period  approved  by the  Company is  guaranteed  either  contractually  or by
statute.  A Stock  Option  Agreement  may contain such  additional  or different
provisions with respect to leave of absence as the Committee may approve, either
at the time of grant of an option or at a later time.

<PAGE>

      3.2   Termination of Employment.

      For purposes of the Plan "Termination of Employment,"  shall mean the time
when the  employee-employer  relationship  between the optionee and the Company,
any  Subsidiary  or  any  Parent  Corporation  is  terminated  for  any  reason,
including,  but  not  by  way  of  limitation,  a  termination  by  resignation,
discharge, death, disability or retirement; but excluding (i) terminations where
there is a simultaneous  reemployment or continuing employment of an optionee by
the Company, any Subsidiary or any Parent Corporation, (ii) at the discretion of
the  Committee,  terminations  which  result  in a  temporary  severance  of the
employee-employer  relationship,  and (iii) at the  discretion of the committee,
terminations  which  are  followed  by  the  simultaneous   establishment  of  a
consulting  relationship by the Company,  a Subsidiary or any Parent Corporation
with the former employee. Subject to Section 3.1, the Committee, in its absolute
discretion,  shall determine the effect of all matters and questions relating to
Termination   of  Employment;   provided,   however,   that,   with  respect  to
employee-employer  relationship  shall constitute a Termination of Employment if
and to the  extent  that  such  leave  of  absence  or other  change  interrupts
employment  for  the  purposes  of  Section  422(a)  (2) of  the  Code  and  the
then-applicable regulations and revenue ruling under said Section.

      3.3   Issuance of Stock Certificates.

      Upon  exercise  of an  option,  the  Company  shall  deliver to the person
exercising such option a stock certificate evidencing the shares of Common Stock
acquired upon  exercise.  Notwithstanding  the  foregoing,  the Committee in its
discretion  may  require  the Company to retain  possession  of any  certificate
evidencing  stock  acquired upon  exercise ofan option which remains  subject to
repurchase  under the  provisions  of the Stock  Option  Agreement  or any other
agreement  signed  by the  optionee  in  order  to  facilitate  such  repurchase
provisions.

      3.4   Terms and Conditions of Options.

      Each option  granted  under the Plan shall be evidenced by a written Stock
Option Agreement  ("Stock Option  Agreement")  between the option holder and the
Company  providing that the option is subject to the terms and conditions of the
Plan and to such other terms and  conditions not  inconsistent  therewith as the
Committee may deem appropriate in each case.

      3.5   Adjustments   Upon   Changes   in    Capitalization;    Merger   and
            Consolidation.

      If the  outstanding  share of Common Stock are changed  into, or exchanged
for cash or a different number or kind of shares or securities of the Company or
of  another  corporation  through  reorganization,   merger,   recapitalization,
reclassification,  stock split-up,  reverse stock split,  stock dividend,  stock
consolidation, stock combination, stock reclassification or similar transaction,
an appropriate  adjustment shall be made by the Committee in the number and kind
of shares as to which  options may be granted.  In the event of such a change or
exchange,  other than for shares or  securities  of  another  corporation  or by
reason  of  reorganization,  the  Committee  shall  also  make  a  corresponding
adjustment  changing  the  number or kind of shares and the  exercise  price per
share  allocated to unexercised  options or portions  thereof;  which shall have
been  granted  prior to any  such  change,  shall  likewise  be  made.  Any such
adjustment,  however, 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 shares quantities or prices).

<PAGE>

      In the event of a "spin-off' or other  substantial  distribution of assets
of the Company which has a material diminutive effect upon the Fair Market Value
of the Common Stock,  the Committee in its discretion  shall make an appropriate
and  equitable  adjustment  to the exercise  prices of options then  outstanding
under the Plan.

      Where an adjustment  under this Section 3.5 of the type described above is
made to an Incentive Stock Option, the adjustment will be made in a manner which
will not be  considered a  "modification"  under the  provisions  of  subsection
424(b)(3) of the Code.

      In connection  with the  dissolution  or  liquidation  of the Company or a
partial  liquidation  involving  50% or more of the  assets  of the  Company,  a
reorganization of the Company in which another entity is the survivor,  a merger
or  reorganization  of the Company under which more than 50% of the Common Stock
outstanding prior to the merger or reorganization is converted into cash or into
a security of another entity,  a sale of more than 50% of the Company's  assets,
or a similar  event that the  Committee  determines,  in its  discretion,  would
materially  alter the structure of the Company or its ownership,  the Committee,
upon 30 days prior written notice to the option holders, may, in its discretion,
do one or more of the following: (i) shorten the period during which options are
exercisable  (provided  they remain  exercisable  for at least 30 days after the
date the notice is given);  (ii)  accelerate  any  vesting  schedule to which an
option is subject; (iii) arrange to have the surviving or successor entity grant
securities and option prices,  or (iv) cancel options upon payment to the option
holders in cash,  with  respect to each  option to the extent  then  exercisable
(including  any  options  as to  which  the  exercise  has been  accelerated  as
contemplated  in clause (ii) above,  of any amount that is the equivalent of the
Fair Market Value of the Common Stock (at the effective time of the dissolution,
liquidation,  merger,  reorganization,  sale or other  event) or the fair market
value of the option. In the case of a change in corporate control, the Committee
acceleration of the  exercisability  of any option pursuant to this Section 3.5,
take into account the penalties that my result  directly or indirectly from such
acceleration to either the Company or the option holder,  or both, under Section
280G of the  Code,  and may  decide to limit  such  acceleration  to the  extent
necessary to avoid or mitigate such penalties or their effects.

      No  fractional  share of Common  Stock  shall be issued  under the Plan on
account of any adjustment under this Section 3,5.

      3.6   Rights of Participants and Beneficiaries.

      The Company  shall pay all amounts  payable  hereunder  only to the option
holder or beneficiaries entitled thereto pursuant to the Plan. The Company shall
not be liable for the date,

<PAGE>

      3.10  Privileges of Stock Ownership;  Non-Distributive  Intent; Reports to
            Option Holders.

      A participant  in the Plan shall not be entitled to the privilege of stock
ownership as to any shares of Common Stock not actually  issued to the optionee.
Upon  exercise  of an  option at a time  when  there is not in effect  under the
Securities  Act of 1933, as amended,  a Registration  Statement  relating to the
delivery a Prospectus  meeting the requirement of Section 1 O(a)(3) of said Act,
the  optionee  shall  represent  and warrant in writing to the Company  that the
shares  purchased are being  acquired for  investment and not with a view to the
distribution thereof.

      The Company shall  furnish to each  optionee  under the Plan the Company's
annual report and such other periodic  reports,  if any, as are  disseminated by
the Company in the ordinary course to its stockholders.

      3.11  Legending Share Certificates.

      In order the enforce any  restrictions  imposed  upon Common  Stock issued
upon exercise of an option  granted under the Plan or to which such Common Stock
may be subject,  the Committee may cause a legend or legends to be placed on any
share certificates representing such Common Stock, which legend or legends shall
made appropriate reference to such restrictions,  including, but not limited to,
a restriction against sale of such Common Stock for any period of time as may be
required by applicable laws or regulations.  If any restrictions with respect to
which a legend was  placed on any  certificate  ceases to apply to Common  Stock
represented by such  certificate,  the owner of the Common Stock  represented by
such  certificates  may  require  the  Company  to cause the  issuance  of a new
certificate not bearing the legend.

      Additionally,  and not by way of limitation, the Committee may impose such
restrictions  on any Common  Stock  issued  pursuant  to the Plan as it may deem
advisable,  including, without limitation.,  restrictions under the requirements
of any stock exchange upon which Common Stock is then traded.

      3.12  Use of Proceeds.

      Proceeds realized pursuant to the exercise of options Under the Plan shall
constitute general funds of the Company.

      3.13  Changes  in  Capital   Structure;   No   Impediment   to   Corporate
            Transaction.

      The existence of  outstanding  options under the Plan shall not effect the
Company's  right to effect  adjustments,  recapitalization,  reorganizations  or
other changes in its or any other  corporation's  capital structure or business,
any merger or  consolidation,  any issuance of bonds,  debentures,  preferred or
prior  preference  stock ahead of or affecting  Common Stock, the dissolution or
liquidation of the Company's or any other corporation's  assets or business,  or
any other  corporate  act,  whether  similar  to the events  described  above or
otherwise.

<PAGE>

      3.14  Effective Date of the Plan.

      The  Plan  shall  be  effective  as of the  date  of its  approval  by the
stockholders  of the Company  within twelve months after the date of the Board's
initial adoption of the Plan.  Options may be granted but not exercised prior to
stockholder  approval of the Plan. If any options are so granted and stockholder
approval  shall  not have  been  obtained  within  twelve  months of the date of
adoption of this Plan by the Board  ofDirectors,  such options  shall  terminate
retroactively as ofthe date they were granted.

      3.15  Termination.

      The Plan shall  terminate  automatically  as of the close of  business  on
December  15,  2009 or earlier as  provided  in Section  3.8.  Unless  otherwise
provided  herein,  the  termination of the Plan shall not affect the validity of
any option agreement outstanding at the date of such termination.

      3.16  No Effect on Other Plans.

      The  adoption  of the Plan  shall not  affect  any other  compensation  or
incentive  plans  in  effect  for the  Company,  any  Subsidiary  or any  Parent
Corporation.  Nothing in the Plan shall be  construed  to limit the right of the
Company (i) to  establish  any other forms or  incentives  or  compensation  for
employees of the Company,  any  Subsidiary or any Parent  Corporation or (ii) to
grant or  assume  options  or other  rights  otherwise  that  under  the Plan in
connection  with  any  proper  corporate  purpose  including  but  not by way of
limitation,   the  grant  or  assumption  of  options  in  connection  with  the
acquisition  by purchase.  lease,  merger,  consolidation  or otherwise,  of the
business, stock or assets of any corporation, partnership, firm or association.

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