WEBSIDESTORY, INC.

                           2000 EQUITY INCENTIVE PLAN

        Originally Effective as the 1998 Stock Option Plan August 1, 1998
    Also Originally Effective as the 1999 Stock Option Plan on June 16, 1999
                     Amended and Restated December 20, 1999
                    Approved By Stockholders December 20,1999
                       Termination Date: December 19,2009


1.    PURPOSES.

      (a)   AMENDMENT AND RESTATEMENT. The Plan amends and restates the
WebSideStory 1998 Stock Option Plan effective August 1, 1998 and the
WebSideStory 1999 Stock Option Plan effective June 16, 1999 (the "Prior Plans").
All outstanding options granted under the Prior Plans also shall be amended.

      (b)   ELIGIBLE STOCK AWARD RECIPIENTS. The persons eligible to receive
Stock Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.

      (c)   AVAILABLE STOCK AWARDS. The purpose of the Plan is to provide a
means by which eligible recipients of Stock Awards may be given an opportunity
to benefit from increases in value of the Common Stock through the granting of
the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses and (iv) rights to acquire restricted stock.

      (d)   GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Stock Awards, to secure
and retain the services of new members of this group and to provide incentives
for such persons to exert maximum efforts for the success of the Company and its
Affiliates.

2.    DEFINITIONS.

      (a)   "AFFILIATE" means any parent corporation or subsidiary corporation
of the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.

      (b)   "BOARD" means the Board of Directors of the Company.

      (c)   "CODE" means the Internal Revenue Code of 1986, as amended.

      (d)   "COMMITTEE" means a committee of one or more members of the Board
appointed by the Board in accordance with subsection 3(c).

      (e)   "COMMON STOCK" means the common stock of the Company.



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      (f)   "COMPANY" means WebSideStory, Inc., a California corporation.

      (g)   "CONSULTANT" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (ii) who is a member of the Board of Directors
of an Affiliate. However, the term "Consultant" shall not include either
Directors who are not compensated by the Company for their services as Directors
or Directors who are merely paid a director's fee by the Company for their
services as Directors.

      (h)   "CONTINUOUS SERVICE" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director will not
constitute an interruption of Continuous Service. The Board or the chief
executive officer of the Company, in that party's sole discretion, may determine
whether Continuous Service shall be considered interrupted in the case of any
leave of absence approved by that party, including sick leave, military leave or
any other personal leave.

      (i)   "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to shareholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.

      (j)   "DIRECTOR" means a member of the Board of Directors of the Company.

      (k)   "DISABILITY" means (i) before the Listing Date, the inability of a
person, in the opinion of a qualified physician acceptable to the Company, to
perform the major duties of that person's position with the Company or an
Affiliate of the Company because of the sickness or injury of the person and
(ii) after the Listing Date, the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.

      (l)   "EMPLOYEE" means any person employed by the Company or an Affiliate.
Mere service as a Director or payment of a director's fee by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company or
an Affiliate.

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

      (n)   "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock determined as follows:

            (i)   If the Common Stock is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
the Fair Market Value of a share of Common Stock shall be the closing sales
price for such stock (or the closing bid, if no




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sales were reported) as quoted on such exchange or market (or the exchange or
market with the greatest volume of trading in the Common Stock) on the last
market trading day prior to the day of determination, as reported in The Wall
Street Journal or such other source as the Board deems reliable.

            (ii)  In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.

            (iii) Prior to the Listing Date, the value of the Common Stock shall
be determined in a manner consistent with Section 260.140.50 of Title 10 of the
California Code of Regulations.

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

      (p)   "LISTING DATE" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.

      (q)   "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or a subsidiary, does
not receive compensation (directly or indirectly) from the Company or its parent
or a subsidiary for services rendered as a consultant or in any capacity other
than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act ("Regulation S-K"), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.

      (r)   "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.

      (s)   "OFFICER" means (i) before the Listing Date, any person designated
by the Company as an officer and (ii) on and after the Listing Date, a person
who is an officer of the Company within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder.

      (t)   "OPTION" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.



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      (u)   "OPTION AGREEMENT" means a written agreement between the Company and
an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.

      (v)   "OPTIONHOLDER" means a person to whom an Option is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding
Option.

      (w)   "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury Regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.

      (x)   "PARTICIPANT" means a person to whom a Stock Award is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.

      (y)   "PLAN" means this WebSideStory, Inc. 2000 Equity Incentive Plan.

      (z)   "RULE 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.

      (aa)  "SECURITIES ACT" means the Securities Act of 1933, as amended.

      (bb)  "STOCK AWARD" means any right granted under the Plan, including an
Option, a stock bonus and a right to acquire restricted stock.

      (cc)  "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.

      (dd)  "TEN PERCENT SHAREHOLDER" means a person who owns (or is deemed to
own pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates.

3.    ADMINISTRATION.

      (a)   ADMINISTRATION BY BOARD. The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
subsection 3(c).

      (b)   POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:

            (i)   To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; what



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type or combination of types of Stock Award shall be granted; the provisions of
each Stock Award granted (which need not be identical), including the time or
times when a person shall be permitted to receive Common Stock pursuant to a
Stock Award; and the number of shares of Common Stock with respect to which a
Stock Award shall be granted to each such person.

            (ii)  To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.

            (iii) To amend the Plan or a Stock Award as provided in Section 12.

            (iv)  Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.

      (c)   DELEGATION TO COMMITTEE.

            (i)   GENERAL. The Board may delegate administration of the Plan to
a Committee or Committees of one (1) or more members of the Board, and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee any of
the administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.

            (ii)  COMMITTEE COMPOSITION WHEN COMMON STOCK IS PUBLICLY TRADED. At
such time as the Common Stock is publicly traded, in the discretion of the
Board, a Committee may consist solely of two or more Outside Directors, in
accordance with Section 162(m) of the Code, and/or solely of two or more
Non-Employee Directors, in accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (1) delegate to a committee of one or
more members of the Board who are not Outside Directors the authority to grant
Stock Awards to eligible persons who are either (a) not then Covered Employees
and are not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (b) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code and/or) (2)
delegate to a committee of one or more members of the Board who are not
Non-Employee Directors the authority to grant Stock Awards to eligible persons
who are not then subject to Section 16 of the Exchange Act.

            (d)   EFFECT OF BOARD'S DECISION. All determinations,
interpretations and constructions made by the Board in good faith shall not be
subject to review by any person and shall be Final, binding and conclusive on
all persons.




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4.    SHARES SUBJECT TO THE PLAN.

      (a)   SHARE RESERVE. Subject to the provisions of Section 11 relating to
adjustments upon changes in Common Stock, the Common Stock that may be issued
pursuant to Stock Awards shall not exceed in the aggregate Twenty-Three Million
Eight Hundred Forty Three Thousand Seven Hundred Eighty-Five (23,843,785) shares
of Common Stock.

      (b)   REVERSION OF SHARES TO THE SHARE RESERVE. If any Stock Award shall
for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full, the shares of Common Stock not acquired under
such Stock Award shall revert to and again become available for issuance under
the Plan.

      (c)   SOURCE OF SHARES. The shares of Common Stock subject to the Plan may
be unissued shares or reacquired shares, bought on the market or otherwise.

      (d)   SHARE RESERVE LIMITATION. Prior to the Listing Date and to the
extent then required by Section 260.140.45 of Title 10 of the California Code of
Regulations, the total number of shares of Common Stock issuable upon exercise
of all outstanding Options and the total number of shares of Common Stock
provided for under any stock bonus or similar plan of the Company shall not
exceed the applicable percentage as calculated in accordance with the conditions
and exclusions of Section 260.140.45 of Title 10 of the California Code of
Regulations, based on the shares of Common Stock of the Company that are
outstanding at the time the calculation is made.

5.    ELIGIBILITY.

      (a)   ELIGIBILITY FOR SPECIFIC STOCK AWARDS. Incentive Stock Options may
be granted only to Employees. Stock Awards other than Incentive Stock Options
may be granted to Employees, Directors and Consultants.

      (b)   TEN PERCENT SHAREHOLDERS.

            (i)   A Ten Percent Shareholder shall not be granted an Incentive
Stock Option unless the exercise price of such Option is at least one hundred
ten percent (110%) of the Fair Market Value of the Common Stock at the date of
grant and the Option is not exercisable after the expiration of five (5) years
from the date of grant.

            (ii)  Prior to the Listing Date, a Ten Percent Shareholder shall not
be granted a Nonstatutory Stock Option unless the exercise price of such Option
is at least (i) one hundred ten percent (110%) of the Fair Market Value of the
Common Stock at the date of grant or (ii) such lower percentage of the Fair
Market Value of the Common Stock at the date of grant as is permitted by Section
260.140.41 of Title 10 of the California Code of Regulations at the time of the
grant of the Option.

            (iii) Prior to the Listing Date, a Ten Percent Shareholder shall not
be granted a restricted stock award unless the purchase price of the restricted
stock is at feast (i) one hundred


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percent (100%) of the Fair Market Value of the Common Stock at the date of
grant or (ii) such lower percentage of the Fair Market Value of the Common Stock
at the date of grant as is permitted by Section 260.140.41 of Title 10 of the
California Code of Regulations at the time of the grant of the Option.

      (c)   SECTION 162(m) LIMITATION. Subject to the provisions of Section 11
relating to adjustments upon changes in the shares of Common Stock, no Employee
shall be eligible to be granted Options covering more than Eight Million
(8,000,000) shares of Common Stock during any calendar year. This subsection
5(c) shall not apply prior to the Listing Date and, following the Listing Date,
this subsection 5(c) shall not apply until (i) the earliest of: (1) the first
material modification of the Plan (including any increase in the number of
shares of Common Stock reserved for issuance under the Plan in accordance with
Section 4); (2) the issuance of all of the shares of Common Stock reserved for
issuance under the Plan; (3) the expiration of the Plan; or (4) the first
meeting of shareholders at which Directors are to be elected that occurs after
the close of the third calendar year following the calendar year in which
occurred the first registration of an equity security under Section 12 of the
Exchange Act; or (ii) such other date required by Section 162(m) of the Code and
the rules and regulations promulgated thereunder.

      (d)   CONSULTANTS.

            (i)   Prior to the Listing Date, a Consultant shall not be eligible
for the grant of a Stock Award if, at the time of grant, either the offer or the
sale of the Company's securities to such Consultant is not exempt under Rule 701
of the Securities Act ("Rule 701") because of the nature of the services that
the Consultant is providing to the Company, or because the Consultant is not a
natural person, or as otherwise provided by Rule 701, unless the Company
determines that such grant need not comply with the requirements of Rule 701 and
will satisfy another exemption under the Securities Act as well as comply with
the securities laws of all other relevant jurisdictions.

            (ii)  From and after the Listing Date, a Consultant shall not be
eligible for the grant of a Stock Award if, at the time of grant, a Form S-8
Registration Statement under the Securities Act ("Form S-8") is not available to
register either the offer or the sale of the Company's securities to such
Consultant because of the nature of the services that the Consultant is
providing to the Company, or because the Consultant is not a natural person, or
as otherwise provided by the rules governing the use of Form S-8, unless the
Company determines both (i) that such grant (A) shall be registered in another
manner under the Securities Act (e.g., on a Form S-3 Registration Statement) or
(B) does not require registration under the Securities Act in order to comply
with the requirements of the Securities Act, if applicable, and (ii) that such
grant complies with the securities laws of all other relevant jurisdictions.

            (iii) Rule 701 and Form S-8 generally are available to consultants
and advisors only if (i) they are natural persons; (ii) they provide bona fide
services to the issuer, its parents, its majority owned subsidiaries or
majority-owned subsidiaries of the issuer's parent; and (iii) the services are
not in connection with the offer or sale of securities in a capital-raising
transaction, and do not directly or indirectly promote or maintain a market for
the issuer's securities.



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6.    OPTION PROVISIONS.

      Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and, if certificates are issued, a separate certificate or certificates
will be issued for shares of Common Stock purchased on exercise of each type of
Option. The provisions of separate Options need not be identical, but each
Option shall include (through incorporation of provisions hereof by reference in
the Option or otherwise) the substance of each of the following provisions:

      (a)   TERM. Subject to the provisions of subsection 5(b) regarding Ten
Percent Shareholders, no Option granted prior to the Listing Date shall be
exercisable after the expiration of ten (10) years from the date it was granted,
and no Incentive Stock Option granted on or after the Listing Date shall be
exercisable after the expiration of ten (10) years from the date it was granted.

      (b)   EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Shareholders, the exercise
price of each Incentive Stock Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the Common Stock subject to the Option on the
date the Option is granted. Notwithstanding the foregoing, an Incentive Stock
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.

      (c)   EXERCISE PRICE OF A NONSTATUTORY STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Shareholders, the exercise
price of each Nonstatutory Stock Option granted prior to the Listing Date shall
be not less than eighty-five percent (85%) of the Fair Market Value of the
Common Stock subject to the Option on the date the Option is granted. The
exercise price of each Nonstatutory Stock Option granted on or after the Listing
Date shall be not less than eighty-five percent (85%) of the Fair Market Value
of the Common Stock subject to the Option on the date the Option is granted.
Notwithstanding the foregoing, a Nonstatutory Stock Option may be granted with
an exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.

      (d)   CONSIDERATION. The purchase price of Common Stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) (1) by delivery to the
Company of other Common Stock, (2) according to a deferred payment or other
similar arrangement with the Optionholder or (3) in any other form of legal
consideration that may be acceptable to the Board. Unless otherwise specifically
provided in the Option, the purchase price of Common Stock acquired pursuant to
an Option that is paid by delivery to the Company of other Common Stock
acquired, directly or indirectly from the Company, shall be paid only by shares
of the Common Stock of the Company that have been held for more than six (6)
months



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(or such longer or shorter period of time required to avoid a charge to earnings
for financial accounting purposes). At any time that the Company is incorporated
in Delaware, payment of the Common Stock's "par value," as defined in the
Delaware General Corporation Law, shall not be made by deferred payment.

      In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.

      (e)   TRANSFERABILITY OF AN INCENTIVE STOCK OPTION. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only BY the Optionholder. Notwithstanding the foregoing, the Optionholder may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.

      (f)   TRANSFERABILITY OF A NONSTATUTORY STOCK OPTION. A Nonstatutory Stock
Option granted prior to the Listing Date shall not be transferable except by
will or by the laws of descent and distribution and, to the extent provided in
the Option Agreement, to such further extent as permitted by Section
260.140.41(d) of Title 10 of the California Code of Regulations at the time of
the grant of the Option, and shall be exercisable during the lifetime of the
Optionholder only by the Optionholder. A Nonstatutory Stock Option granted on or
after the Listing Date shall be transferable to the extent provided in the
Option Agreement. If the Nonstatutory Stock Option does not provide for
transferability, then the Nonstatutory Stock Option shall not be transferable
except by will or by the laws of descent and distribution and shall be
exercisable during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionholder, shall thereafter be
entitled to exercise the Option.

      (g)   VESTING GENERALLY. The total number OF shares OF Common Stock
subject to an Option may, but need not, vest and therefore become exercisable in
periodic installments that may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares of Common Stock as to which an Option may
be exercised.

      (h)   MINIMUM VESTING PRIOR TO THE LISTING DATE. Notwithstanding the
foregoing subsection 6(g), to the extent that the following restrictions on
vesting are required by Section 260.140.41(f) of Title 10 of the California Code
of Regulations at the time of the grant of the Option, then:

            (i)   Options granted prior to the Listing Date to an Employee who
is not an Officer, Director or Consultant shall provide for vesting of the total
number of shares of



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Common Stock at a rate of at least twenty percent (20%) per year over five (5)
years from the date the Option was granted, subject to reasonable conditions
such as continued employment; and

            (ii)  Options granted prior to the Listing Date to Officers,
Directors or Consultants may be made fully exercisable, subject to reasonable
conditions such as continued employment, at any time or during any period
established by the Company.

      (i)   TERMINATION OF CONTINUOUS SERVICE. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the date of
termination) but only within such period of time ending on the earlier of (i)
the date three (3) months following the termination of the Optionholder's
Continuous Service (or such longer or shorter period specified in the Option
Agreement, which period shall not be less than thirty (30) days for Options
granted prior to the Listing Date unless such termination is for cause), or (ii)
the expiration of the term of the Option as set forth in the Option Agreement.
If, after termination, the Optionholder does not exercise his or her Option
within the time specified in the Option Agreement, the Option shall terminate.

      (j)   EXTENSION OF TERMINATION DATE. An Optionholder's Option Agreement
may also provide that if the exercise of the Option following the termination of
the Optionholder's Continuous Service (other than upon the Optionholder's death
or Disability) would be prohibited at any time solely because the issuance of
shares of Common Stock would violate the registration requirements under the
Securities Act, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in subsection 6(a) or (ii) the
expiration of a period of three (3) months after the termination of the
Optionholder's Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.

      (k)   DISABILITY OF OPTIONHOLDER. In the event that an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement, which period shall not be less than six (6) months for
Options granted prior to the Listing Date) or (ii) the expiration of the term of
the Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified
herein, the Option shall terminate.

      (l)   DEATH OF OPTIONHOLDER. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the period (if any) specified in the Option Agreement
after the termination of the Optionholder's Continuous Service for a reason
other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by
the Optionholder's estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to exercise the
option upon the Optionholder's death



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pursuant to subsection 6(e) or 6(f), but only within the period ending on the
earlier of (1) the date six (6) months following the date of death (or such
longer or shorter period specified in the Option Agreement, which period shall
not be less than six (6) months for Options granted prior to the Listing Date)
or (2) the expiration of the term of such Option as set forth in the Option
Agreement. If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate.

      (m)   EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares of Common Stock subject to the Option prior to the full vesting of
the Option. Subject to the "Repurchase Limitation" in subsection 10(h), any
unvested shares of Common Stock so purchased may be subject to a repurchase
option in favor of the Company or to any other restriction the Board determines
to be appropriate. Provided that the "Repurchase Limitation" in subsection 10(h)
is not violated, the Company will not exercise its repurchase option until at
least six (6) months (or such longer or shorter period of time required to avoid
a charge to earnings for financial accounting purposes) have elapsed following
exercise of the Option unless the Board otherwise specifically provides in the
Option.

      (n)   RIGHT OF REPURCHASE. Subject to the "Repurchase Limitation" in
subsection 10(h), the Option may, but need not, include a provision whereby the
Company may elect, prior to the Listing Date, to repurchase ALL or any part of
the vested shares of Common Stock acquired by the Optionholder pursuant to the
exercise of the Option. Provided that the "Repurchase Limitation" in subsection
10(h) is not violated, the Company will not exercise its repurchase option until
at least six (6) months (or such longer or shorter period of time required to
avoid a charge to earnings for financial accounting purposes) have elapsed
following exercise of the Option unless the Board otherwise specifically
provides in the Option.

      (o)   RIGHT OF FIRST REFUSAL. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionholder of
the intent to transfer all or any part of the shares of Common Stock received
upon the exercise of the Option. Except as expressly provided in this subsection
6(o), such right of first refusal shall otherwise comply with any applicable
provisions of the Bylaws of the Company.

      (p)   RE-LOAD OPTIONS.

            (i)   Without in any way limiting the authority of the Board to make
or not to make grants of Options hereunder, the Board shall have the authority
(but not an obligation) to include as part of any Option Agreement a provision
entitling the Optionholder to a further Option (a "Re-Load Option") in the event
the Optionholder exercises the Option evidenced by the Option Agreement, in
whole or in part, by surrendering other shares of Common Stock in accordance
with this Plan and the terms and conditions of the Option Agreement. Unless
otherwise specifically provided in the Option, the Optionholder shall not
surrender shares of Common Stock acquired, directly or indirectly from the
Company, unless such shares have been



                                       11
<PAGE>   12

held for more than six (6) months (or such longer or shorter period of time
required to avoid a charge to earnings for financial accounting purposes).

            (ii)  Any such Re-Load Option shall (1) provide for a number of
shares of Common Stock equal to the number of shares of Common Stock surrendered
as part or all of the exercise price of such Option; (2) have an expiration date
which is the same as the expiration date of the Option the exercise of which
gave rise to such Re-Load Option; and (3) have an exercise price which is equal
to one hundred percent (100%) of the Fair Market Value of the Common Stock
subject to the Re-Load Option on the date of exercise of the original Option.
Notwithstanding the foregoing, a Re-Load Option shall be subject to the same
exercise price and term provisions heretofore described for Options under the
Plan.

            (iii) Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the grant
of the original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollar ($100,000) annual limitation on the exercisability of Incentive Stock
Options described in subsection 10(d) and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall
be subject to the availability of sufficient shares of Common Stock under
subsection 4(a) and the "Section 162(m) Limitation" on the grants of Options
under subsection 5(c) and shall be subject to such other terms and conditions as
the Board may determine which are not inconsistent with the express provisions
of the Plan regarding the terms of Options.

7.    PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.

      (a)   STOCK BONUS AWARDS. Each stock bonus agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem appropriate.
The terms and conditions of stock bonus agreements may change from time to time,
and the terms and conditions of separate stock bonus agreements need not be
identical, but each stock bonus agreement shall include (through incorporation
of provisions hereof by reference in the agreement or otherwise) the substance
of each of the following provisions:

            (i)   CONSIDERATION. A stock bonus may be awarded in consideration
for past services actually rendered to the Company or an Affiliate for its
benefit.

            (ii)  VESTING. Subject to the "Repurchase Limitation" in subsection
10(h), shares of Common Stock awarded under the stock bonus agreement may, but
need not, be subject to a share repurchase option in favor of the Company in
accordance with a vesting schedule to be determined BY the Board.

            (iii) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. Subject to
the "Repurchase Limitation" in subsection 10(h), in the event a Participant's
Continuous Service terminates, the Company may reacquire any or all of the
shares of Common Stock held by the Participant which have not vested as of the
date of termination under the terms of the stock bonus agreement.




                                       12
<PAGE>   13

            (iv)  TRANSFERABILITY. For a stock bonus award made before the
Listing Date, rights to acquire shares of Common Stock under the stock bonus
agreement shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Participant
only by the Participant. For a stock bonus award made on or after the Listing
Date, rights to acquire shares of Common Stock under the stock bonus agreement
shall be transferable by the Participant only upon such terms and conditions as
are set forth in the stock bonus agreement, as the Board shall determine in its
discretion, so long as Common Stock awarded under the stock bonus agreement
remains subject to the terms of the stock bonus agreement.

      (b)   RESTRICTED STOCK AWARDS. Each restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time and the terms and conditions of
separate restricted stock purchase agreements need not be identical, but each
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:

            (i)   PURCHASE PRICE. Subject to the provisions of subsection 5(b)
regarding Ten Percent Shareholders, the purchase price under each restricted
stock purchase agreement shall be such amount as the Board shall determine and
designate in such restricted stock purchase agreement. For restricted stock
awards made prior to the Listing Date, the purchase price shall not be less
than eighty-five percent (85%) of the Common Stock's Fair Market Value on the
date such award is made or at the time the purchase is consummated. For
restricted stock awards made on or after the Listing Date, the purchase price
shall not be less than eighty-five percent (85%) of the Common Stock's Fair
Market Value on the date such award is made or at the time the purchase is
consummated.

            (ii)  CONSIDERATION. The purchase price of Common Stock acquired
pursuant to the restricted stock purchase agreement shall be paid either: (i) in
cash at the time of purchase; (ii) at the discretion of the Board, according to
a deferred payment or other similar arrangement with the Participant; or (iii)
in any other form of legal consideration that may be acceptable to the Board in
its discretion; provided, however, that at any time that the Company is
incorporated in Delaware, then payment of the Common Stock's "par value," as
de-fined in the Delaware General Corporation Law, shall not be made by deferred
payment.

            (iii) VESTING. Subject to the "Repurchase Limitation" in subsection
10(h), shares of Common Stock acquired under the restricted stock purchase
agreement may, but need not, be subject to a share repurchase option in favor of
the Company in accordance with a vesting schedule to be determined by the Board.

            (iv)  TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. Subject to
the "Repurchase Limitation" in subsection 10(h), in the event a Participant's
Continuous Service terminates, the Company may repurchase or otherwise reacquire
any or all of the shares of Common Stock held by the Participant which have not
vested as of the date of termination under the terms of the restricted stock
purchase agreement.



                                       13
<PAGE>   14

            (v)   TRANSFERABILITY. For a restricted stock award made before the
Listing Date, rights to acquire shares of Common Stock under the restricted
stock purchase agreement shall not be transferable except by will or by the laws
of descent and distribution and shall be exercisable during the lifetime of the
Participant only by the Participant. For a restricted stock award made on or
after the Listing Date, rights to acquire shares of Common Stock under the
restricted stock purchase agreement shall be transferable by the Participant
only upon such terms and conditions as are set forth in the restricted stock
purchase agreement, as the Board shall determine in its discretion, so long as
Common Stock awarded under the restricted stock purchase agreement remains
subject to the terms of the restricted stock purchase agreement.

8.    COVENANTS OF THE COMPANY.

      (a)   AVAILABILITY OF SHARES. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.

      (b)   SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and sell shares
of Common Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such Stock Award. If, after reasonable efforts, the Company is unable to obtain
from any such regulatory commission or agency the authority which counsel for
the Company deems necessary for the lawful issuance and sale of Common Stock
under the Plan, the Company shall be relieved from any liability for failure to
issue and sell Common Stock upon exercise of such Stock Awards unless and until
such authority is obtained.

9.    USE OF PROCEEDS FROM STOCK.

      Proceeds from the sale of Common Stock pursuant to Stock Awards shall
constitute general funds of the Company.

10.   MISCELLANEOUS.

      (a)   ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall have the
power to accelerate the time at which a Stock Award may first be exercised or
the time during which a Stock Award or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest.

      (b)   SHAREHOLDER RIGHTS. No Participant shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares of
Common Stock subject to such Stock Award unless and until such Participant has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.




                                       14
<PAGE>   15

      (c)   No EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant any right to continue to serve the Company or an Affiliate in
the capacity in effect at the time the Stock Award was granted or shall affect
the right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.

      (d)   INCENTIVE STOCK OPTION $100,000 LIMITATION. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.

      (e)   INVESTMENT ASSURANCES. The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Stock Award, (i) to
give written assurances satisfactory to the Company as to the Participant's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (ii) to
give written assurances satisfactory to the Company stating that the Participant
is acquiring Common Stock subject to the Stock Award for the Participant's own
account and not with any present intention of selling or otherwise distributing
the Common Stock. The foregoing requirements, and any assurances given pursuant
to such requirements, shall be inoperative if (1) the issuance of the shares of
Common Stock upon the exercise or acquisition of Common Stock under the Stock
Award has been registered under a then currently effective registration
statement under the Securities Act or (2) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the Common Stock.

      (f)   WITHHOLDING OBLIGATIONS. To the extent provided by the terms of a
Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of Common
Stock under a Stock Award by any of the following means (in addition to the
Company's right to withhold from any compensation paid to the Participant by the
Company) or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares of Common Stock from the shares of
Common Stock otherwise issuable to the Participant as a result of the exercise
or acquisition of Common Stock under the Stock Award, provided, however, that no
shares of Common Stock are



                                       15
<PAGE>   16

withheld with a value exceeding the minimum amount of tax required to be
withheld by law; or (iii) delivering to the Company owned and unencumbered
shares of Common Stock.

      (g)   INFORMATION OBLIGATION. Prior to the Listing Date, to the extent
required by Section 260.140.46 of Title 10 of the California Code of
Regulations, the Company shall deliver financial statements to Participants at
least annually. This subsection 10(g) shall not apply to key Employees whose
duties in connection with the Company assure them access to equivalent
information.

      (h)   REPURCHASE LIMITATION. The terms of any repurchase option shall be
specified in the Stock Award and may be either at Fair Market Value at the time
of repurchase or at not less than the original purchase price. To the extent
required by Section 260.140.41 and Section 260.140.42 of Title 10 of the
California Code of Regulations at the time a Stock Award is made, any repurchase
option contained in a Stock Award granted prior to the Listing Date to a person
who is not an Officer, Director or Consultant shall be upon the terms described
below:

            (i)   FAIR MARKET VALUE. If the repurchase option gives the Company
the right to repurchase the shares of Common Stock upon termination of
employment at not less than the Fair Market Value of the shares of Common Stock
to be purchased on the date of termination of Continuous Service, then (i) the
right to repurchase shall be exercised for cash or cancellation of purchase
money indebtedness for the shares of Common Stock within ninety (90) days of
termination of Continuous Service (or in the case of shares of Common Stock
issued upon exercise of Stock Awards after such date of termination, within
ninety (90) days after the date of the exercise) or such longer period as may be
agreed to by the Company and the Participant (for example, for purposes of
satisfying the requirements of Section 1202(c)(3) of the Code regarding
"qualified small business stock") and (ii) the right terminates when the shares
of Common Stock become publicly traded.

            (ii)  ORIGINAL PURCHASE PRICE. If the repurchase option gives the
Company the right to repurchase the shares of Common Stock upon termination of
Continuous Service at the original purchase price, then (i) the right to
repurchase at the original purchase price shall lapse at the rate of at least
twenty percent (20%) of the shares of Common Stock per year over five (5) years
from the date the Stock Award is granted (without respect to the date the Stock
Award was exercised or became exercisable) and (ii) the right to repurchase
shall be exercised for cash or cancellation of purchase money indebtedness for
the shares of Common Stock within ninety (90) days of termination of Continuous
Service (or in the case of shares of Common Stock issued upon exercise of
Options after such date of termination, within ninety (90) days after the date
of the exercise) or such longer period as may be agreed to by the Company and
the Participant (for example, for purposes of satisfying the requirements of
Section 1202(c)(3) of the Code regarding "qualified small business stock").

      (i)   REPURCHASE LIMITATION. Notwithstanding any other provisions
contained herein, Options granted pursuant to this Plan shall be subject to the
following conditions:

            (i)   REPURCHASE RIGHT. At the Committee's discretion, Common Stock
issued pursuant to the exercise of an Option may be subject to a right, but not
an obligation, of



                                       16
<PAGE>   17

repurchase by the Corporation (the "Right of Repurchase"), at the price
specified in subsection 10(i)(h), if the Optionholder ceases to be an Employee
for any reason ("Employment Termination") at any time after the grant of the
Option pursuant to which such Common Stock was issued. Common Stock issued by
the Company will only be transferable by the Optionholder subject to the Right
of Repurchase, and the Company will legend the Right of Repurchase on the stock
certificates evidencing such shares of Common Stock and will take such other
steps as it deems necessary to ensure compliance with this restriction. The
Company's rights under this subsection 10(i)(i) will be freely assignable, in
whole or in part.

            (ii)  REPURCHASE PRICE. The price per share of Common Stock at which
the Company may exercise the Right of Repurchase under subsection 10(i)(i) (the
"Repurchase Price") will be the higher of the exercise price of each share of
Common Stock as paid by the Optionholder, or Fair Market Value of the shares of
Common Stock on the date the Company sends the notice to the Optionholder of its
exercise of its Right of Repurchase pursuant to subsection 10(i)(i).

            (iii) REPURCHASE PROCEDURE. The Company may exercise its Right of
Repurchase by sending a written notice to the Optionholder and to the Escrow
Agent, if any, of its taking such action and specifying the number of shares of
Common Stock being repurchased. The Company's Right of Repurchase will terminate
if not exercised by written notice from the Company to the Optionholder within
90 days of the date on which the Company learns of the Employment Termination or
the last date any Option granted to such Optionholder is exercised, which ever
is later. If the Company exercises its Right of Repurchase, the Optionholder, or
if applicable, the Escrow Agent, will deliver to the Company every stock
certificate representing the shares of Common Stock being repurchased, together
with appropriate Assignments Separate from Certificates, and the Company will
then promptly pay the total Repurchase Price in cash (or cancellation of
purchase money indebtedness for the Common Stock, if applicable) to the
Optionholder, or if applicable, to the Escrow Agent, for delivery to the
Optionholder.

            (iv)  ELECTION TO DEFER PURCHASE OF INCENTIVE STOCK OPTION SHARES.

                  (A)   Notwithstanding the preceding provisions of this
subsection 10(i), an Optionholder whose shares of Common Stock were issued
pursuant to an Incentive Stock Option may elect to defer the Company's
repurchase of such Common Stock pursuant to this subsection 10(i) until the
holding period requirements of Section 422(a) of the Code are met. Such election
will be in writing in such form as the Committee may require and will be
delivered to the Company and to the Escrow Agent by certified mail no later than
seven days after the date on which the Optionholder receives notice that the
Company elects to exercise its Right of Repurchase. Such election will pertain
to all such shares of Common Stock issued to the Optionholder and will be
irrevocable.

                  (B)   With respect to an Optionholder who makes the election
described in subsection 10(i)(iv), the Company will repurchase such Common Stock
on or before the date which is 90 days following the earlier of the date on
which the Optionholder dies or the date on which the holding period requirements
of Section 422(a) of the Code are met. The Repurchase Price of each such share
of Common Stock determined under subsection 10(i)(ii) will be



                                       17
<PAGE>   18

calculated by substituting for the Optionholder's Employment Termination date
the earlier of the date on which the Optionholder dies or the date on which such
holding period requirements are met.

            (v)   ESCROW. To facilitate the consummation of the Company's Right
of Repurchase under this subsection 10(i)(i), at the request of the Committee,
the Optionholder and the Company will execute Joint Escrow Instructions and the
Optionholder will deliver and deposit with the Escrow Agent named in the Joint
Escrow Instructions two "Assignments Separate from Certificate," together with
all certificates evidencing the shares of Common Stock issued to the
Optionholder pursuant to the Plan, duly endorsed in blank. The Escrow Agent will
hold such documents and deliver the same to the Company pursuant to the Joint
Escrow Instructions and in accordance with the terms of this subsection 10(i),
as applicable.

            (vi)  BINDING EFFECT. The Company's Right of Repurchase will inure
to the benefit of its successors and assigns and will be binding on any
representative, executor, administrator, heir, or legatee of the Optionholder.

            (vii) PAYMENT OF NET AMOUNT OWING. Notwithstanding anything to the
contrary contained herein, if the Company determines to exercise its Rights of
Repurchase pursuant to this subsection before any Common Stock has been issued
as a result of an exercise of an Option, in lieu of issuing any Common Stock,
the Company will have the right, but not the obligation, to pay to the
Optionholder the net amount owing to the Optionholder.

            (vii) TERMINATION OF RIGHT OF REPURCHASE. Notwithstanding any other
provision of this subsection 10(i)(i), in the event that the Common Stock is
listed on any United States securities exchange or traded on any formal
over-the-counter market in general use in the United States at the time the
Optionholder would otherwise be required to transfer his or her Common Stock,
the Company will no longer have the Right of Repurchase, and the Optionholder
will have no obligation to comply with this Section 10(i)(i).

      (j)   RIGHT OF FIRST REFUSAL. Notwithstanding any other provisions
contained herein, Options granted pursuant to this Plan shall be subject to the
following conditions:

            (i)   RIGHT OF FIRST REFUSAL. At the Committee's discretion, Common
      Stock issued pursuant to the exercise of an Option may be subject to a
      requirement that if an Optionholder proposes to sell, pledge, or otherwise
      transfer any Common Stock acquired pursuant to exercise of an Option, or
      any interest in such Common Stock, to any person or entity, the Company
      will have a right of first refusal (the "Right of First Refusal") with
      respect to such Common Stock. Any Optionholder desiring to transfer Common
      Stock subject to the Right of First Refusal will give a written notice
      (the "Transfer Notice") to the Company describing fully the proposed
      transfer, including the number of shares of Common Stock proposed to be
      transferred, the proposed transfer price, and the name and address of the
      proposed transferee. The Transfer Notice will be signed both by the
      Optionholder and by the proposed transferee and must constitute a binding
      commitment of both parties to the transfer of the Common Stock. The
      Company will have the right to purchase the Common Stock subject to the
      Transfer Notice on the




                                       18
<PAGE>   19

      terms of the proposal referred to in the Transfer Notice, subject to any
      change in such terms permitted under subsection 10(j)(d), by delivery of a
      notice of exercise of the Right of First Refusal within 30 days after the
      date the Transfer Notice is received by the Company. The Company's rights
      under this subsection 10(j)(i) will be freely assignable, in whole or in
      part.

            (ii)  TRANSFER OF SHARES. If the Company fails to exercise the Right
      of First Refusal within 30 days after the date on which it receives the
      Transfer Notice, the Optionholder may, not later than six months following
      receipt of the Transfer Notice by the Company, consummate a transfer of
      the Common Stock subject to the Transfer Notice on the terms and
      conditions described in the Transfer Notice. Any proposed transfer on
      terms and conditions different from those described in the Transfer
      Notice, as well as any subsequent proposed transfer by the Optionholder,
      will again be subject to the Right of First Refusal and will again require
      compliance with the procedure described in Section 10(j)(i). If the
      Company exercises its Right of First Refusal, the Optionholder will
      immediately endorse and deliver to the Company every stock certificate
      representing the Common Stock being purchased, and the Company will then
      promptly pay the purchase price in accordance with the terms set forth in
      the Transfer Notice.

            (iii) REPURCHASE PAYMENT. The amount payable to an Optionholder
      pursuant to the Company's exercise of the Right of First Refusal will be
      paid to the Optionholder in accordance with the terms and conditions of
      the Transfer Notice or may, at the election of the Company, be paid in
      full in cash.

            (iv)  BINDING EFFECT. The Company's Right of First Refusal will
      inure to the benefit of its successors and assigns and will be binding
      upon any transferee of the Common Stock, other than a transferee acquiring
      Common Stock in a transaction with respect to which the Company failed to
      exercise its Right of First Refusal (a "Free Transferee") or a transferee
      of a Free Transferee.

            (v)   TERMINATION OF RIGHT OF FIRST REFUSAL. Notwithstanding any
      other provision of this subsection 10(j), if the Common Stock is listed on
      any United States securities exchange or traded on any formal
      over-the-counter market in general use in the United States at the time
      the Optionholder desires to transfer his or her Common Stock, the Company
      will no longer have the Right of First Refusal, and the Optionholder will
      have no obligation to comply with this subsection 10(j).

11.   ADJUSTMENTS UPON CHANGES IN STOCK

      (a)   CAPITALIZATION ADJUSTMENTS. If any change is made in the Common
Stock subject to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number. of securities subject to the Plan
pursuant to subsection 4(a) and the




                                       19
<PAGE>   20

maximum number of securities subject to award to any person pursuant to
subsection 5(c), and the outstanding Stock Awards will be appropriately adjusted
in the class(es) and number of securities and price per share of Common Stock
subject to such outstanding Stock Awards. The Board shall make such adjustments,
and its determination shall be final, binding and conclusive. (The conversion of
any convertible securities of the Company shall not be treated as a transaction
"without receipt of consideration" by the Company.)

      (b)   CHANGE IN CONTROL--DISSOLUTION OR LIQUIDATION. In the event of a
dissolution or liquidation of the Company, then all outstanding Stock Awards
shall terminate immediately prior to such event. The Committee will notify the
Optionholder not less than 15 days prior to the proposed consummation of a
pending dissolution or liquidation, and the Option will be exercisable as to all
Common Stock which are vested prior to expiration until immediately prior to the
consummation of such action.

      (c)   CHANGE IN CONTROL--ASSET SALE, MERGER, CONSOLIDATION OR REVERSE
MERGER. In the event of (i) a sale, lease or other disposition of all or
substantially all of the assets of the Company, (ii) a merger or consolidation
in which the Company is not the surviving corporation or (iii) a reverse merger
in which the Company is the surviving corporation but the shares of Common Stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, then any surviving corporation or acquiring corporation shall assume
any Stock Awards outstanding under the Plan or shall substitute similar stock
awards (including an award to acquire the same consideration paid to the
shareholders in the transaction described in this subsection 11(c) for those
outstanding under the Plan). In the event any surviving corporation or acquiring
corporation refuses to assume such Stock Awards or to substitute similar stock
awards for those outstanding under the Plan, then with respect to Stock Awards
held by Participants whose Continuous Service has not terminated, the vesting of
such Stock Awards (and, if applicable, the time during which such Stock Awards
may be exercised) shall be accelerated in full, and the Stock Awards shall
terminate if not exercised (if applicable) at or prior to such event. With
respect to any other Stock Awards outstanding under the Plan, such Stock Awards
shall terminate if not exercised (if applicable) prior to such event. The
Committee will notify the Optionholder not less than 15 days prior to the
proposed consummation of such transaction, and the Option will be exercisable as
to all Common Stock which are vested prior to expiration and until immediately
prior to the consummation of such transaction.

12.   AMENDMENT OF THE PLAN AND STOCK AWARDS

      (a)   AMENDMENT OF PLAN. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in Common Stock, no amendment shall be effective unless
approved by the shareholders of the Company to the extent shareholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.

      (b)   SHAREHOLDER APPROVAL. The Board may, in its sole discretion, submit
any other amendment to the Plan for shareholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations



                                       20
<PAGE>   21

thereunder regarding the exclusion of performance-based compensation from the
limit on corporate deductibility of compensation paid to certain executive
officers.

      (c)   CONTEMPLATED AMENDMENTS. It is expressly contemplated that the Board
may amend the Plan in any respect the Board deems necessary or advisable to
provide eligible Employees with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.

      (d)   NO IMPAIRMENT OF RIGHTS. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.

      (e)   AMENDMENT OF STOCK AWARDS. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.

13.   TERMINATION OR SUSPENSION OF THE PLAN.

      (a)   PLAN TERM. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the date the Plan is adopted by the Board or approved by
the shareholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.

      (b)   NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan shall
not impair rights and obligations under any Stock Award granted while the Plan
is in effect except with the written consent of the Participant.

14.   EFFECTIVE DATE OF PLAN.

The Plan shall become effective as determined by the Board, but no Stock Award
shall be exercised (or, in the case of a stock bonus, shall be granted) unless
and until the Plan has been approved by the shareholders of the Company, which
approval shall be within twelve (12) months before or after the date the Plan is
adopted by the Board.

15.   CHOICE OF LAW.

The law of the State of California shall govern all questions concerning the
construction, validity and interpretation of this Plan, without regard to such
state's conflict of laws rules.



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Source: OneCLE Business Contracts.