EXHIBIT 4.1
 
 
 
 
 
 
                                    CNS, INC.
                             2000 STOCK OPTION PLAN
 
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                                TABLE OF CONTENTS
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SECTION 1.  General Purpose of Plan; Definitions ............................  1
 
SECTION 2.  Administration ..................................................  3
 
SECTION 3.  Stock Subject to Plan ...........................................  4
 
SECTION 4.  Eligibility .....................................................  5
 
SECTION 5.  Stock Options ...................................................  5
 
SECTION 6. Stock Appreciation Rights ........................................  9
 
SECTION 7. Restricted Stock ................................................. 10
 
SECTION 8. Deferred Stock Awards ............................................ 12
 
SECTION 9. Other Awards ..................................................... 13
 
SECTION 10. Transfer, Leave of Absence, etc. ................................ 13
 
SECTION 11. Amendments and Termination ...................................... 14
 
SECTION 12. Unfunded Status of Plan ......................................... 14
 
SECTION 13. General Provisions .............................................. 14
 
SECTION 14. Effective Date of Plan .......................................... 15
 
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                                    CNS, INC.
                             2000 STOCK OPTION PLAN
 
 
 
         SECTION 1. General Purpose of Plan; Definitions.
 
         The name of this plan is the CNS, Inc. 2000 Stock Plan (the "Plan").
The purpose of the Plan is to enable CNS, Inc. (the "Company") and its
Subsidiaries to retain and attract executives, other key employees, non-employee
directors and consultants who contribute to the Company's success by their
ability, ingenuity and industry, and to enable such individuals to participate
in the long-term success and growth of the Company by giving them a proprietary
interest in the Company.
 
         For purposes of the Plan, the following terms shall be defined as set
forth below:
 
         a.       "Agreement" means an agreement by and between the Company and
                  an optionee or recipient of an award under the Plan setting
                  forth the terms and conditions of the option or award.
 
         b.       "Board" means the Board of Directors of the Company as it may
                  be comprised from time to time.
 
         c.       "Cause" means a felony conviction of a participant or the
                  failure of a participant to contest prosecution for a felony,
                  willful misconduct, dishonesty or intentional violation of a
                  statute, rule or regulation, any of which, in the judgment of
                  the Company, is harmful to the business or reputation of the
                  Company.
 
         d.       "Code" means the Internal Revenue Code of 1986, as amended
                  from time to time, or any successor statute.
 
         e.       "Consultant" means any person, including an advisor, engaged
                  by the Company, the Parent Corporation or a Subsidiary of the
                  Company to render services and who is compensated for such
                  services but who is not an employee of the Company, the Parent
                  Corporation or any Subsidiary of the Company. A Non-Employee
                  Director may serve as a Consultant.
 
         f.       "Committee" means the Committee referred to in Section 2 of
                  the Plan. If at any time no Committee shall be in office, then
                  the functions of the Committee specified in the Plan shall be
                  exercised by the Board, unless the Plan specifically states
                  otherwise.
 
         g.       "Company" means CNS, Inc., a corporation organized under the
                  laws of the State of Delaware (or any successor corporation).
 
         h.       "Deferred Stock" means an award made pursuant to Section 8
                  below of the right to receive Stock at the end of a specified
                  deferral period.
 
 
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         i.       "Disability" means total and permanent disability as
                  determined by the Committee.
 
         j.       "Early Retirement" means retirement, with consent of the
                  Committee at the time of retirement, from active employment
                  with the Company and any Subsidiary or Parent Corporation of
                  the Company.
 
         k.       "Fair Market Value" of Stock on any given date shall be
                  determined by the Committee as follows: (a) if the Stock is
                  listed for trading on one or more national securities
                  exchanges, or is traded on the Nasdaq Stock Market or the
                  Nasdaq Small Cap Market, the last reported sales price on the
                  principal such exchange or the Nasdaq Stock Market or Nasdaq
                  Small Cap Market on the date in question, or if such Stock
                  shall not have been traded on such principal exchange on such
                  date, the last reported sales price on such principal exchange
                  or the Nasdaq Stock Market or Nasdaq Small Cap Market on the
                  first day prior thereto on which such Stock was so traded; or
                  (b) if the Stock is not listed for trading on a national
                  securities exchange or the Nasdaq Stock Market or the Nasdaq
                  Small Cap Market, but is traded in the over-the-counter
                  market, including the Nasdaq OTC Bulletin Board System, the
                  closing bid price for such Stock on the date in question, or
                  if there is no such bid price for such Stock on such date, the
                  closing bid price on the first day prior thereto on which such
                  price existed; or (c) if neither (a) or (b) is applicable, by
                  any means fair and reasonable by the Committee, which
                  determination shall be final and binding on all parties.
 
         l.       "Incentive Stock Option" means any Stock Option intended to be
                  and designated as an "Incentive Stock Option" within the
                  meaning of Section 422 of the Code.
 
         m.       "Non-Employee Director" means a "Non-Employee Director" within
                  the meaning of Rule 16b-3(b)(3) under the Securities Exchange
                  Act of 1934.
 
         n.       "Non-Qualified Stock Option" means any Stock Option that is
                  not an Incentive Stock Option, and is intended to be and is
                  designated as a "Non-Qualified Stock Option" or an Incentive
                  Stock Option that ceases to so qualify due to a failure to
                  comply with section 422 of the Code or an amendment to such
                  Stock Option.
 
         o.       "Normal Retirement" means retirement from active employment
                  with the Company and any Subsidiary or Parent Corporation of
                  the Company on or after age 60.
 
         p.       "Other Awards" means those awards granted pursuant to Section
                  9 hereof.
 
         q.       "Outside Director" means a Director who: (a) is not a current
                  employee of the Company or any member of an affiliated group
                  which includes the Company; (b) is not a former employee of
                  the Company who receives compensation for prior services
                  (other than benefits under a tax-qualified retirement plan)
                  during the taxable year; (c) has not been an officer of the
                  Company; (d) does not receive remuneration from the Company,
                  either directly or indirectly, in any capacity other than as a
                  director, except as otherwise permitted under Code Section
                  162(m) and regulations thereunder. For this purpose,
                  remuneration includes any payment in exchange for goods or
                  services.
 
 
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                  This definition shall be further governed by the provisions of
                  Code Section 162(m) and regulations promulgated thereunder.
 
         r.       "Parent Corporation" means any corporation (other than the
                  Company) in an unbroken chain of corporations ending with the
                  Company if each of the corporations (other than the Company)
                  owns stock possessing 50% or more of the total combined voting
                  power of all classes of stock in one of the other corporations
                  in the chain.
 
         s.       "Restricted Stock" means an award of shares of Stock that are
                  subject to restrictions under Section 7 below.
 
         t.       "Retirement" means Normal Retirement or Early Retirement.
 
         u.       "Stock" means the Common Stock, $.01 par value per share, of
                  the Company.
 
         v.       "Stock Appreciation Right" means the right pursuant to an
                  award granted under Section 6 below to surrender to the
                  Company all or a portion of a Stock Option in exchange for an
                  amount equal to the difference between (i) the Fair Market
                  Value, as of the date such Stock Option or such portion
                  thereof is surrendered, of the shares of Stock covered by such
                  Stock Option or such portion thereof, and (ii) the aggregate
                  exercise price of such Stock Option or such portion thereof.
 
         w.       "Stock Option" means any option to purchase shares of Stock
                  granted pursuant to Section 5 below.
 
         x.       "Subsidiary" means any corporation (other than the Company) in
                  an unbroken chain of corporations beginning with the Company
                  if each of the corporations (other than the last corporation
                  in the unbroken chain) owns stock possessing 50% or more of
                  the total combined voting power of all classes of stock in one
                  of the other corporations in the chain.
 
         SECTION 2. Administration.
 
         The Plan shall be administered by the Board of Directors or by a
Committee appointed by the Board of Directors of the Company consisting of at
least two Directors, all of whom shall be Outside Directors and Non-Employee
Directors, who shall serve at the pleasure of the Board.
 
         The Committee shall have the power and authority to grant to eligible
employees, non-employee directors or consultants, pursuant to the terms of the
Plan: (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock,
(iv) Deferred Stock awards, or (v) Other Awards.
 
         In particular, the Committee shall have the authority:
 
         (i)      to select the members of the Board, officers, and other key
                  employees of the Company and its Subsidiaries and other
                  eligible persons to whom Stock Options, Stock
 
 
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                  Appreciation Rights, Restricted Stock, Deferred Stock awards
                  and/or Other Awards may from time to time be granted
                  hereunder;
 
         (ii)     to determine whether and to what extent Incentive Stock
                  Options, Non-Qualified Stock Options, Stock Appreciation
                  Rights, Restricted Stock, Deferred Stock awards and/or Other
                  Awards, or a combination of the foregoing, are to be granted
                  hereunder;
 
         (iii)    to determine the number of shares to be covered by each such
                  award granted hereunder;
 
         (iv)     to determine the terms and conditions, not inconsistent with
                  the terms of the Plan, of any award granted hereunder
                  (including, but not limited to, any restriction on any Stock
                  Option or other award and/or the shares of Stock relating
                  thereto), which authority shall be exclusively vested in the
                  Committee (and not the Board) for purposes of establishing
                  performance criteria used with Restricted Stock and Deferred
                  Stock awards and Other Awards; provided, however, that in the
                  event of a merger or asset sale, the applicable provisions of
                  Sections 5(c) and 7(c) of the Plan shall govern the
                  acceleration of vesting of any Stock Option or awards; and
 
         (v)      to determine whether, to what extent and under what
                  circumstances Stock and other amounts payable with respect to
                  an award under this Plan shall be deferred either
                  automatically or at the election of the participant.
 
         The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of the
Plan and any award issued under the Plan (and any agreements relating thereto);
and to otherwise supervise the administration of the Plan. The Committee may
delegate to executive officers of the Company the authority to exercise the
powers specified in (i), (ii), (iii), (iv) and (v) above with respect to persons
who are not either the chief executive officer of the Company or the four
highest paid officers of the Company other than the chief executive officer.
 
         All decisions made by the Committee pursuant to the provisions of the
Plan shall be final and binding on all persons, including the Company and Plan
participants.
 
         SECTION 3. Stock Subject to Plan.
 
         The total number of shares of Stock reserved and available for
distribution under the Plan shall be 700,000 shares. Such shares may consist, in
whole or in part, of authorized and unissued shares.
 
         Subject to paragraph (b)(iv) of Section 6 below, if any shares that
have been optioned ceased to be subject to Stock Options, or if any shares
subject to any Restricted Stock or Deferred Stock award or Other Award granted
hereunder are forfeited or such award otherwise terminates without a payment
being made to the participant, such shares shall again be available for
distribution in connection with future awards under the Plan. Upon a
stock-for-stock exercise of a Stock Option or the withholding of Stock for the
payment of the option price or taxes, only the net number of shares
 
 
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issued to the optionee shall be used to calculate the number of shares remaining
available for distribution under the Plan.
 
         In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, other change in corporate
structure affecting the Stock, or spin-off or other distribution of assets to
shareholders, such substitution or adjustment shall be made in the aggregate
number of shares reserved for issuance under the Plan, in the number and option
price of shares subject to outstanding options granted under the Plan, and in
the number of shares subject to Restricted Stock or Deferred Stock awards
granted under the Plan as may be determined to be appropriate by the Committee,
in its sole discretion, provided that the number of shares subject to any award
shall always be a whole number. Such adjusted option price shall also be used to
determine the amount payable by the Company upon the exercise of any Stock
Appreciation Right associated with any Option.
 
         SECTION 4. Eligibility.
 
         Officers, other key employees of the Company or any Parent Corporation
or Subsidiary, members of the Board of Directors, and Consultants who are
responsible for or contribute to the management, growth and/or profitability of
the business of the Company and its Subsidiaries are eligible to be granted
Stock Options, Stock Appreciation Rights, Restricted Stock or Deferred Stock
awards or Other Awards under the Plan. The optionees and participants under the
Plan shall be selected from time to time by the Committee, in its sole
discretion, from among those eligible, and the Committee shall determine, in its
sole discretion, the number of shares covered by each award.
 
         Notwithstanding the foregoing, no person shall receive grants of Stock
Options under this Plan which exceed 150,000 shares during any fiscal year of
the Company.
 
         SECTION 5. Stock Options.
 
         Any Stock Option granted under the Plan shall be in such form and upon
such terms and conditions as the Committee may from time to time approve.
 
         The Stock Options granted under the Plan may be of two types: (i)
Incentive Stock Options and (ii) Non-Qualified Stock Options. No Incentive Stock
Options shall be granted under the Plan after March 12, 2010.
 
         The Committee shall have the authority to grant any optionee Incentive
Stock Options, Non-Qualified Stock Options, or both types of options (in each
case with or without Stock Appreciation Rights). To the extent that any option
does not qualify as an Incentive Stock Option, it shall constitute a separate
Non-Qualified Stock Option.
 
         Anything in the Plan to the contrary notwithstanding, no term of this
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify either the Plan or any Incentive Stock Option
under Section 422 of the Code. The preceding sentence shall not preclude any
modification or amendment to an outstanding Incentive Stock Option, whether or
not such modification or amendment results in
 
 
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disqualification of such Option as an Incentive Stock Option, provided the
optionee consents in writing to the modification or amendment.
 
         Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.
 
         (a) Option Price. The option price per share of Stock purchasable under
a Stock Option shall be determined by the Committee at the time of grant,
provided however, the option price per share of Stock purchasable under an
Incentive Stock Option or a Non-Qualified Stock Option shall not be less than
100% of the Fair Market Value of the Stock on the date the option is granted. If
an employee owns or is deemed to own (by reason of the attribution rules
applicable under Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of stock of the Company or any Parent Corporation or
Subsidiary and an Incentive Stock Option is granted to such employee, the option
price shall be no less than 110% of the Fair Market Value of the Stock on the
date the option is granted.
 
         (b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date the option is granted. If an employee owns or is deemed to
own (by reason of the attribution rules of Section 424(d) of the Code) more than
10% of the combined voting power of all classes of stock of the Company or any
Parent Corporation or Subsidiary and an Incentive Stock Option is granted to
such employee, the term of such option shall be no more than five years from the
date of grant.
 
         (c) Exercisability. Stock Options shall be exercisable at such time or
times as determined by the Committee at or after grant, subject to the
restrictions stated in Section 5(b) above. In the event that the Committee does
not determine the time at which a Stock Option shall be exercisable, such Stock
Option shall be exercisable one year after the date of grant and shall cease to
be on date following the happening of one of the events described in Section
5(f), (g), (h) and (i) or as specified in Section 5(b) whichever is earlier. If
the Committee provides, in its discretion, that any option is exercisable only
in installments, the Committee may waive such installment exercise provisions at
any time. Notwithstanding anything contained in the Plan to the contrary, the
Committee may, in its discretion, extend or vary the term of any Stock Option or
any installment thereof, whether or not the optionee is then employed by the
Company, if such action is deemed to be in the best interests of the Company;
provided, however, that in the event of a merger or sale of assets, the
provisions of this Section 5(c) shall govern vesting acceleration.
Notwithstanding the foregoing, unless the Stock Option Agreement provides
otherwise, any Stock Option granted under this Plan shall be exercisable in
full, without regard to any installment exercise provisions, for a period
specified by the Committee, but not to exceed sixty (60) days prior to the
occurrence of any of the following events: (i) dissolution or liquidation of the
Company other than in conjunction with a bankruptcy of the Company or any
similar occurrence, (ii) any merger, consolidation, acquisition, separation,
reorganization, or similar occurrence, where the Company will not be the
surviving entity or (iii) the transfer of substantially all of the assets of the
Company or 20% or more of the outstanding Stock of the Company.
 
 
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         The grant of an option pursuant to the Plan shall not limit in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge,
exchange or consolidate or to dissolve, liquidate, sell or transfer all or any
part of its business or assets.
 
         (d) Method of Exercise. Stock Options may be exercised in whole or in
part at any time during the option period by giving written notice of exercise
to the Company specifying the number of shares to be purchased. Such notice
shall be accompanied by payment in full for the purchase price, either by
certified or bank check, or by any other form of legal consideration deemed
sufficient by the Committee and consistent with the Plan's purpose and
applicable law, including promissory notes or a properly executed exercise
notice together with irrevocable instructions to a broker acceptable to the
Company to promptly deliver to the Company the amount of sale or loan proceeds
to pay the exercise price. As determined by the Committee, in its sole
discretion, payment in full or in part may also be made in the form of Stock
already owned by the optionee (which in the case of Stock acquired upon exercise
of an option has been owned for more than six months on the date of surrender)
or, in the case of the exercise of a Non-Qualified Stock Option, Restricted
Stock or Deferred Stock subject to an award hereunder (based, in each case, on
the Fair Market Value of the Stock on the date immediately preceding the date
the option is exercised, as determined by the Committee), provided, however,
that, in the case of an Incentive Stock Option, the right to make a payment in
the form of already owned shares may be authorized only at the time the option
is granted, and provided further that in the event payment is made in the form
of shares of Restricted Stock or a Deferred Stock award, the optionee will
receive a portion of the option shares in the form of, and in an amount equal
to, the Restricted Stock or Deferred Stock award tendered as payment by the
optionee. If the terms of an option so permit, an optionee may elect to pay all
or part of the option exercise price by having the Company withhold from the
shares of Stock that would otherwise be issued upon exercise that number of
shares of Stock having a Fair Market Value equal to the aggregate option
exercise price for the shares with respect to which such election is made. No
shares of Stock shall be issued until full payment therefor has been made. An
optionee shall generally have the rights to dividends and other rights of a
shareholder with respect to shares subject to the option when the optionee has
given written notice of exercise, has paid in full for such shares and, if
requested, has given the representation described in paragraph (a) of section
13.
 
         (e) Non-transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee.
 
        (f) Termination by Death. Subject to the rights set forth in Section
5(k), if an optionee's employment by the Company and any Subsidiary or Parent
Corporation terminates by reason of death, any Incentive Stock Option may
thereafter be immediately exercised, to the extent then exercisable (or on such
accelerated basis as the Committee shall determine at or after grant), by the
legal representative of the estate or by the legatee of the optionee under the
will of the optionee, for a period of twelve months (or such shorter period as
the Committee shall specify at grant) from the date of such death or until the
expiration of the stated term of the option, whichever period is shorter. In the
event of termination of employment by reason of death, if, pursuant to its
terms, any Incentive Stock Option is exercised after the expiration of the
exercise periods that apply for purposes of Section 422 of the Code, the option
will thereafter be treated as a Non-Qualified Stock Option.
 
 
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         (g) Termination by Reason of Disability. Subject to the rights set
forth in Section 5(k), if an optionee's employment by the Company and any
Subsidiary or Parent Corporation terminates by reason of Disability, any
Incentive Stock Option held by such optionee may thereafter be exercised, to the
extent it was exercisable at the time of termination due to Disability (or on
such accelerated basis as the Committee shall determine at or after grant), but
may not be exercised after twelve months (or such shorter period as the
Committee shall specify at grant) from the date of such termination of
employment or the expiration of the stated term of the option, whichever period
is shorter. In the event of termination of employment by reason of Disability,
if, pursuant to its terms, an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of Section 422 of the
Code, the option will thereafter be treated as a Non-Qualified Stock Option.
 
         (h) Termination by Reason of Retirement. Subject to the rights set
forth in Section 5(k), if an optionee's employment by the Company and any
Subsidiary or Parent Corporation terminates by reason of Retirement and the
terms of the Stock Option so provide, any Incentive Stock Option held by such
optionee may thereafter be exercised to the extent it was exercisable at the
time of such Retirement, but may not be exercised after twelve months (or such
shorter period as the Committee shall specify at grant) from the date of such
termination of employment or the expiration of the stated term of the option,
whichever period is shorter. In the event of termination of employment by reason
of Retirement, if an Incentive Stock Option is exercised after the expiration of
the exercise periods that apply for purposes of Section 422 of the Code, the
option will thereafter be treated as a Non-Qualified Stock Option.
 
         (i) Other Termination. Subject to the rights set forth in Section 5(k),
or unless otherwise determined by the Committee, if an optionee's employment by
the Company and any Subsidiary or Parent Corporation terminates for any reason
other than death, Disability or Retirement, any Incentive Stock Option may be
exercised to the extent it was exercisable at such termination, for the lesser
of three months from the date of termination or the balance of the option's
term, except that if the optionee is terminated for Cause by the Company or any
Subsidiary or Parent Corporation, the Stock Option shall thereupon terminate
immediately.
 
         (j) Annual Limit on Incentive Stock Options. The aggregate Fair Market
Value (determined as of the time the Stock Option is granted) of the Common
Stock with respect to which an Incentive Stock Option under this Plan or any
other plan of the Company and any Subsidiary or Parent Corporation is
exercisable for the first time by an optionee during any calendar year shall not
exceed $100,000.
 
         (k) Extension of Exercise Period. At any time prior to or upon an
optionee's termination of employment is by reason of death, Disability,
Retirement or other termination, other than termination for Cause by the Company
or any Subsidiary or Parent Corporation, the Committee, in its sole discretion,
may extend the exercise period of part or all of the Stock Option, for any
additional term which the Committee determines is in the best interest of the
Company. An extension of an Incentive Stock Option shall not be effective
unless: (i) the option price is not less than 100% of the Fair Market Value of
the Stock at the time such extension is granted, (ii) the extension is made
before March 12, 2010, and (iii) the extended exercise period ends within ten
years from the date of such
 
 
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extension. If, pursuant to such extension, an Incentive Stock Option is
exercised after the expiration of the exercise period that apply for purposes of
Section 422 of the Code, the option will thereafter be treated as a
Non-Qualified Stock Option.
 
         (l) Replacement Options. In the event of a merger, consolidation,
acquisition, separation, reorganization or similar occurrence, where the Company
will be the surviving entity, the Committee, at its sole discretion, may assume
or issue Stock Options under this Plan to replace existing Stock Options issued
by acquired entity. The replacement options shall have an option price in which
the excess of the aggregate Fair Market Value of the shares subjected to the
option immediately after the replacement over the aggregate option price of such
shares is not more than the excess of the aggregate Fair Market Value of all
shares subject to the option immediately before such replacement over the
aggregate option price of such shares. The Committee has discretion to issue
replacement Stock Options whose terms conform with those of the existing Stock
Options of the acquired company even if such terms conflict with the terms
provided in this plan. The Committee shall not, in any event, issue replacement
options which give an option of the acquired company any additional benefits not
then existing under the optionee's original Stock Options.
 
         SECTION 6. Stock Appreciation Rights.
 
         (a) Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In the
case of a Non-Qualified Stock Option, such rights may be granted either at or
after the time of the grant of such Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of the grant of the option.
 
         A Stock Appreciation Right or applicable portion thereof granted with
respect to a given Stock Option shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option, except that a
Stock Appreciation Right granted with respect to less than the full number of
shares covered by a related Stock Option shall not be reduced until the exercise
or termination of the related Stock Option exceeds the number of shares not
covered by the Stock Appreciation Right.
 
         A Stock Appreciation Right may be exercised by an optionee, in
accordance with paragraph (b) of this Section 6, by surrendering the applicable
portion of the related Stock Option. Upon such exercise and surrender, the
optionee shall be entitled to receive an amount determined in the manner
prescribed in paragraph (b) of this Section 6. Stock Options which have been so
surrendered, in whole or in part, shall no longer be exercisable to the extent
the related Stock Appreciation Rights have been exercised.
 
         (b) Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Committee, including the following:
 
                  (i) Stock Appreciation Rights shall be exercisable only at
         such time or times and to the extent that the Stock Options to which
         they relate shall be exercisable in accordance with the provisions of
         Section 5 and this Section 6 of the Plan.
 
 
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                  (ii) Upon the exercise of a Stock Appreciation Right, an
         optionee shall be entitled to receive up to, but not more than, an
         amount in cash or shares of Stock equal in value to the excess of the
         Fair Market Value of one share of Stock over the option price per share
         specified in the related option multiplied by the number of shares in
         respect of which the Stock Appreciation Right shall have been
         exercised, with the Committee having the right to determine the form of
         payment; provided the Committee may not require the optionee to receive
         more than 50% of the aggregate value of such Stock Appreciation Rights
         in shares of Stock.
 
                  (iii) Stock Appreciation Rights shall be transferable only
         when and to the extent that the underlying Stock Option would be
         transferable under Section 5 of the Plan.
 
                  (iv) Upon the exercise of a Stock Appreciation Right, the
         Stock Option or part thereof to which such Stock Appreciation Right is
         related shall be deemed to have been exercised for the purpose of the
         limitation set forth in Sections 3 and 4 of the Plan on the total
         number of shares of Stock to be issued under the Plan and the maximum
         number of shares to be awarded to any one person in a fiscal year, but
         only to the extent of the number of shares issued or issuable under the
         Stock Appreciation Right at the time of exercise based on the value of
         the Stock Appreciation Right at such time.
 
                  (v) A Stock Appreciation Right granted in connection with an
         Incentive Stock Option may be exercised only if and when the market
         price of the Stock subject to the Incentive Stock Option exceeds the
         exercise price of such Option.
 
                  (vi) Each award shall be confirmed by, and subject to the
         terms of, a Stock Appreciation Rights Agreement executed by the Company
         and the participant.
 
         SECTION 7. Restricted Stock.
 
         (a) Administration. Shares of Restricted Stock may be issued either
alone or in addition to other awards granted under the Plan. The Committee shall
determine the officers, key employees and Consultants of the Company and
Subsidiaries to whom, and the time or times at which, grants of Restricted Stock
will be made, the number of shares to be awarded, the time or times within which
such awards may be subject to forfeiture, and all other conditions of the
awards. The Committee may also condition the grant of Restricted Stock upon the
attainment of specified performance goals. The provisions of Restricted Stock
awards need not be the same with respect to each recipient.
 
         (b) Awards and Certificates. The prospective recipient of an award of
shares of Restricted Stock shall not have any rights with respect to such award,
unless and until such recipient has executed an Agreement evidencing the award
and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the then applicable terms and conditions.
 
                  (i) Each participant shall be issued a stock certificate in
         respect of shares of Restricted Stock awarded under the Plan. Such
         certificate shall be registered in the name of the participant, and
         shall bear an appropriate legend containing the Company's current
         address
 
 
                                       10
<PAGE>
 
 
         and referring to the terms, conditions, and restrictions applicable to
         such award, substantially in the following form:
 
                  "The transferability of this certificate and the
                  shares of stock represented hereby are subject to
                  the terms and conditions (including forfeiture) of
                  the CNS, Inc. 2000 Stock Plan and an Agreement
                  entered into between the registered owner and CNS,
                  Inc. Copies of such Plan and Agreement are on file
                  in the offices of CNS, Inc."
 
                  (ii) The Committee shall require that the stock certificates
         evidencing such shares be held in custody by the Company until the
         restrictions thereon shall have lapsed, and that, as a condition of any
         Restricted Stock award, the participant shall have delivered a stock
         power, endorsed in blank, relating to the Stock covered by such award.
 
         (c) Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to the Plan shall be subject to the following restrictions and
conditions:
 
                  (i) Subject to the provisions of this Plan and the award
         Agreement, during a period set by the Committee commencing with the
         date of such award (the "Restriction Period"), the participant shall
         not be permitted to sell, transfer, pledge or assign shares of
         Restricted Stock awarded under the Plan. In no event shall the
         Restriction Period be less than one (1) year. Within these limits, the
         Committee may provide for the lapse of such restrictions in
         installments where deemed appropriate.
 
                  (ii) Except as provided in paragraph (c)(i) of this Section 7,
         the participant shall have, with respect to the shares of Restricted
         Stock, all of the rights of a shareholder of the Company, including the
         right to vote the shares and the right to receive any cash dividends.
         The Committee, in its sole discretion, may permit or require the
         payment of cash dividends to be deferred and, if the Committee so
         determines, reinvested in additional shares of Restricted Stock (to the
         extent shares are available under Section 3 and subject to paragraph
         (f) of Section 13). Certificates for shares of unrestricted Stock shall
         be delivered to the grantee promptly after, and only after, the period
         of forfeiture shall have expired without forfeiture in respect of such
         shares of Restricted Stock.
 
                  (iii) Subject to the provisions of the award Agreement and
         paragraph (c)(iv) of this Section 7, upon termination of employment for
         any reason during the Restriction Period, all shares still subject to
         restriction shall be forfeited by the participant.
 
                  (iv) In the event of special hardship circumstances of a
         participant whose employment is terminated (other than for Cause),
         including death, Disability or Retirement, or in the event of an
         unforeseeable emergency of a participant still in service, the
         Committee may, in its sole discretion, when it finds that a waiver
         would be in the best interest of the Company, waive in whole or in part
         any or all remaining restrictions with respect to such participant's
         shares of Restricted Stock.
 
 
                                       11
<PAGE>
 
 
                  (v) Notwithstanding the foregoing, unless the Restricted Stock
         Award or employment agreement of the participant receiving a Restricted
         Stock Award provides otherwise, all restrictions with respect to any
         participant's shares of Restricted Stock shall lapse on the date
         determined by the Committee, but in no event more than sixty (60) days
         prior to the occurrence of any of the following events: (i) dissolution
         or liquidation of the Company other than in conjunction with a
         bankruptcy of the Company or any similar occurrence, (ii) any merger,
         consolidation, acquisition, separation, reorganization, or similar
         occurrence, where the Company will not be the surviving entity or (iii)
         the transfer of substantially all of the assets of the Company or 20%
         or more of the outstanding Stock of the Company. The grant of a
         Restricted Stock Award pursuant to the Plan shall not limit in any way
         the right or power of the Company to make adjustments,
         reclassification, reorganizations or changes of its capital or business
         structure or to merge, exchange or consolidate or to dissolve,
         liquidate, sell or transfer all or any part of its business or assets.
 
         SECTION 8. Deferred Stock Awards.
 
         (a) Administration. Deferred Stock may be awarded either alone or in
addition to other awards granted under the Plan. The Committee shall determine
the officers, key employees and Consultants of the Company and Subsidiaries to
whom and the time or times at which Deferred Stock shall be awarded, the number
of Shares of Deferred Stock to be awarded to any participant or group of
participants, the duration of the period (the "Deferral Period") during which,
and the conditions under which, receipt of the Stock will be deferred, and the
terms and conditions of the award in addition to those contained in paragraph
(b) of this Section 8. The Committee may also condition the grant of Deferred
Stock upon the attainment of specified performance goals. The provisions of
Deferred Stock awards need not be the same with respect to each recipient.
 
         (b) Terms and Conditions.
 
                  (i) Subject to the provisions of this Plan and the award
         agreement, Deferred Stock awards may not be sold, assigned,
         transferred, pledged or otherwise encumbered during the Deferral
         Period. In no event shall the Deferral Period be less than one (1)
         year. At the expiration of the Deferral Period (or Elective Deferral
         Period, where applicable), share certificates shall be delivered to the
         participant, or his legal representative, in a number equal to the
         shares covered by the Deferred Stock award.
 
                  (ii) Amounts equal to any dividends declared during the
         Deferral Period with respect to the number of shares covered by a
         Deferred Stock award will be paid to the participant currently or
         deferred and deemed to be reinvested in additional Deferred Stock or
         otherwise reinvested, all as determined at the time of the award by the
         Committee, in its sole discretion.
 
                  (iii) Subject to the provisions of the award Agreement and
         paragraph (b)(iv) of this Section 8, upon termination of employment for
         any reason during the Deferral Period for a given award, the Deferred
         Stock in question shall be forfeited by the participant.
 
 
                                       12
<PAGE>
 
 
                  (iv) In the event of special hardship circumstances of a
         participant whose employment is terminated (other than for Cause)
         including death, Disability or Retirement, or in the event of an
         unforeseeable emergency of a participant still in service, the
         Committee may, in its sole discretion, when it finds that a waiver
         would be in the best interest of the Company, waive in whole or in part
         any or all of the remaining deferral limitations imposed hereunder with
         respect to any or all of the participant's Deferred Stock.
 
                  (v) A participant may elect to further defer receipt of the
         award for a specified period or until a specified event (the "Elective
         Deferral Period"), subject in each case to the Committee's approval and
         to such terms as are determined by the Committee, all in its sole
         discretion. Subject to any exceptions adopted by the Committee, such
         election must generally be made prior to completion of one half of the
         Deferral Period for a Deferred Stock award (or for an installment of
         such an award).
 
                  (vi) Each award shall be confirmed by, and subject to the
         terms of, a Deferred Stock Agreement executed by the Company and the
         participant.
 
         SECTION 9. Other Awards.
 
         The Committee may from time to time grant Stock, other Stock based and
non-Stock based awards under this Plan including without limitations those
awards pursuant to which shares of Stock are or in the future may be acquired,
awards denominated in Stock units, securities convertible into Stock, phantom
securities and dividend equivalents. The Committee shall determine the terms and
conditions of such Stock, Stock based and non-Stock based awards provided that
such awards shall not be inconsistent with the terms of this Plan.
 
         SECTION 10. Transfer, Leave of Absence, etc.
 
         For purposes of the Plan, the following events shall not be deemed a
termination of employment:
 
         (a) a transfer of an employee from the Company to a Parent Corporation
or Subsidiary, or from a Parent Corporation or Subsidiary to the Company, or
from one Subsidiary to another;
 
         (b) a leave of absence, approved in writing by the Committee, for
military service or sickness, or for any other purpose approved by the Company
if the period of such leave does not exceed ninety (90) days (or such longer
period as the Committee may approve, in its sole discretion); and
 
         (c) a leave of absence in excess of ninety (90) days, approved in
writing by the Committee, but only if the employee's right to reemployment is
guaranteed either by a statute or by contract, and provided that, in the case of
any leave of absence, the employee returns to work within 30 days after the end
of such leave.
 
 
                                       13
<PAGE>
 
 
         SECTION 11. Amendment and Termination.
 
         The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made (i) which would impair the rights
of an optionee or participant under a Stock Option, Stock Appreciation Right,
Restricted Stock, Deferred Stock or other Stock-based award theretofore granted,
without the optionee's or participant's consent, or (ii) which without the
approval of the stockholders of the Company would cause the Plan to no longer
comply with Rule 16b-3 under the Securities Exchange Act of 1934, Section 422 of
the Code or any other regulatory requirements.
 
         The Committee may amend the terms of any award or option theretofore
granted, prospectively or retroactively to the extent such amendment is
consistent with the terms of this Plan, but no such amendment shall impair the
rights of any holder without his or her consent except to the extent authorized
under the Plan. The Committee may also substitute new Stock Options for
previously granted options, including previously granted options having higher
option prices.
 
         SECTION 12. Unfunded Status of Plan.
 
         The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Stock or payments in lieu of or with respect to awards
hereunder, provided, however, that the existence of such trusts or other
arrangements is consistent with the unfunded status of the Plan.
 
         SECTION 13. General Provisions.
 
         (a) The Committee may require each person purchasing shares pursuant to
a Stock Option under the Plan to represent to and agree with the Company in
writing that the optionee or participant is acquiring the shares without a view
to distribution thereof. The certificates for such shares may include any legend
which the Committee deems appropriate to reflect any restrictions on transfer.
 
         All certificates for shares of Stock delivered under the Plan pursuant
to any Restricted Stock, Deferred Stock or other Stock-based awards shall be
subject to such stock-transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Stock is
then listed, and any applicable Federal or state securities laws, and the
Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.
 
         (b) Subject to paragraph (d) below, recipients of Restricted Stock,
Deferred Stock and other Stock-based awards under the Plan (other than Stock
Options) are not required to make any payment or provide consideration other
than the rendering of services.
 
         (c) Nothing contained in this Plan shall prevent the Board of Directors
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is
 
 
                                       14
<PAGE>
 
 
required; and such arrangements may be either generally applicable or applicable
only in specific cases. The adoption of the Plan shall not confer upon any
employee of the Company or any Subsidiary any right to continued employment with
the Company or a Subsidiary, as the case may be, nor shall it interfere in any
way with the right of the Company or a Subsidiary to terminate the employment of
any of its employees at any time.
 
         (d) Each participant shall, no later than the date as of which any part
of the value of an award first becomes includible as compensation in the gross
income of the participant for Federal income tax purposes, pay to the Company,
or make arrangements satisfactory to the Committee regarding payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to the award. The obligations of the Company under the Plan shall be
conditional on such payment or arrangements and the Company and Subsidiaries
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the participant. With respect to
any award under the Plan, if the terms of such award so permit, a participant
may elect by written notice to the Company to satisfy part or all of the
withholding tax requirements associated with the award by (i) authorizing the
Company to retain from the number of shares of Stock that would otherwise be
deliverable to the participant; provided however, the value of the shares
retained by the Company shall not exceed the minimum federal withholding
applicable to the amount of the award includable as compensation in the gross
income of the participant, or (ii) delivering to the Company from shares of
Stock already owned by the participant, that number of shares having an
aggregate Fair Market Value equal to part or all of the tax payable by the
participant under this Section 13(d). Any such election shall be in accordance
with, and subject to, applicable tax and securities laws, regulations and
rulings.
 
         (e) At the time of grant, the Committee may provide in connection with
any grant made under this Plan that the shares of Stock received as a result of
such grant shall be subject to a repurchase right in favor of the Company,
pursuant to which the participant shall be required to offer to the Company upon
termination of employment for any reason any shares that the participant
acquired under the Plan, with the price being the then Fair Market Value of the
Stock or, in the case of a termination for Cause, an amount equal to the cash
consideration paid for the Stock, subject to such other terms and conditions as
the Committee may specify at the time of grant. The Committee may, at the time
of grant of an award under the Plan, provide the Company with the right to
repurchase, or require forfeiture of, shares of Stock acquired pursuant to the
Plan by any participant who, at any time within one year after termination of
employment with the Company, directly or indirectly, competes with, or is
employed by a competitor of, the Company.
 
         (f) The reinvestment of dividends in additional Restricted Stock (or in
Deferred Stock or other types of Plan awards) at the time of any dividend
payment shall only be permissible if the Committee (or the Company's chief
financial officer) certifies in writing that under Section 3 sufficient shares
are available for such reinvestment (taking into account then outstanding Stock
Options and other Plan awards).
 
         SECTION 14. Effective Date of Plan.
 
         The Plan is expressly made subject to the approval by the shareholders
of the Company. If the Plan is not so approved by the shareholders on or before
one year after this Plan's adoption by the
 
 
                                       15
<PAGE>
 
 
Board of Directors, this Plan shall not come into effect. The offering of the
shares hereunder shall be also subject to the effecting by the Company of any
registration or qualification of the shares under any federal or state law or
the obtaining of the consent or approval of any governmental regulatory body
which the Company shall determine, in its sole discretion, is necessary or
desirable as a condition to or in connection with, the offering or the issue or
purchase of the shares covered thereby. The Company shall make every reasonable
effort to effect such registration or qualification or to obtain such consent or
approval.
 
--------------------------
 
         Adopted by the Board of Directors: March 13, 2000.
         Ratified and Approved by the Shareholders:  May 3, 2000.
 
 
                                       16