<PAGE>   1
                                                                     EXHIBIT 4.2

                          INNOSOFT INTERNATIONAL, INC.
                           1999 EQUITY INCENTIVE PLAN

                                    ARTICLE I
                                 PURPOSE OF PLAN

        The Company has adopted this Plan to promote the interests of the
Company and its shareholders by using investment interests in the Company to
attract, retain and motivate its management and other persons, to encourage and
reward their contributions to the performance of the Company, and to align their
interests with the interests of the Company's shareholders. Capitalized terms
not otherwise defined herein have the meanings ascribed to them in Article VIII.

                                   ARTICLE II
                        EFFECTIVE DATE AND TERM OF PLAN

        2.1 TERM OF PLAN. This Plan became effective as of the Effective Date
and will continue in effect until the Expiration Date, at which time this Plan
will automatically terminate.

        2.2 EFFECT ON AWARDS. Awards may be granted only during the Plan Term,
but each Award granted during the Plan Term will remain in effect after the
Expiration Date until such Award has been exercised, terminated or expired in
accordance with its terms and the terms of this Plan; provided, however, no
Common Stock shall be issued under this Plan after the Expiration Date.

        2.3 SHAREHOLDER APPROVAL. This Plan must be approved by the Company's
shareholders within 12 months before or after the Effective Date. The
effectiveness of any Awards granted prior to such shareholder approval will be
subject to such shareholder approval and rescinded if shareholder approval is
not obtained.


                                  ARTICLE III
                             SHARES SUBJECT TO PLAN

        3.1 NUMBER OF SHARES. The maximum number of shares of Common Stock that
may be issued pursuant to Awards under this Plan (including previous versions
hereof or other plans that are replaced or restated by this Plan including the
1992 Stock Incentive Plan) is 1,500,000, subject to adjustment as set forth in
Section 3.4; provided, however, that at no time shall the total number of shares
issuable upon exercise of all outstanding Stock Options and the total number of
shares provided for under any stock bonus or similar plan of the Company exceed
30% of the then outstanding shares of the Company (including convertible
preferred or convertible senior common shares on an as if converted basis).

        3.2 SOURCE OF SHARES. The Common Stock to be issued under this Plan will
be made available, at the discretion of the Administrator, either from
authorized but unissued shares of Common Stock or from previously issued shares
of Common Stock reacquired by the Company.

        3.3 AVAILABILITY OF UNUSED SHARES. Shares of Common Stock subject to
unexercised portions of any Award that expire, terminate or are canceled, and
shares of Common Stock issued pursuant to an Award that are reacquired by the
Company pursuant to the terms of the Award



                                       1
<PAGE>   2

under which such shares were issued, will again become available for the grant
of further Awards under this Plan as part of the shares available under Section
3.1. In addition, shares of Common Stock subject to an Award that are delivered
to or retained by the Company upon exercise to cover cashless exercise or tax
withholding, and any shares of Common Stock underlying an Award that are not
issued because the Award is settled in cash, will be available for grant of
further Awards under this Plan as part of the shares available under Section
3.1.

        3.4 ADJUSTMENT PROVISIONS.

            (a) Adjustments. If the Company consummates any Reorganization in
which holders of shares of Common Stock are entitled to receive in respect of
such shares any additional shares or new or different shares or securities, cash
or other consideration (including, without limitation, a different number of
shares of Common Stock), or if the outstanding shares of Common Stock are
increased, decreased or exchanged for a different number or kind of shares or
other securities through merger, consolidation, sale or exchange of assets of
the Company, reorganization, reincorporation, recapitalization,
reclassification, combination, stock dividend, stock split, reverse stock split,
spin-off, or similar transaction then, an appropriate and proportionate
adjustment shall be made by the Administrator in its discretion in: (1) the
maximum number and kind of shares subject to this Plan as provided in Section
3.1; (2) the number and kind of shares or other securities subject to then
outstanding Awards; and/or (3) the price for each share or other unit of any
other securities subject to, or measurement criteria applicable to, then
outstanding Awards. Anything herein contained to the contrary notwithstanding,
(a) upon dissolution or liquidation of the Company, other than in connection
with a Reorganization of the Company, or a sale of all or substantially all of
its assets, or in one transaction or a series of transactions, 80% or more of
its then outstanding voting securities, to another corporation (an "ASSET SALE"
and a "STOCK SALE," respectively), or (b) upon dissolution or liquidation of the
Company in connection with a reorganization, merger (other than a merger solely
for the purposes of re-incorporating the Company in another jurisdiction),
consolidation, or an Asset Sale or Stock Sale, with respect to which the
surviving corporation or acquiring corporation, or an affiliate thereof, does
not, prior to or concurrent with the succession to the business of the Company
or acquisition of its stock, assume the outstanding Awards (subject to any
applicable provisions of the IRC) or replace the outstanding Awards with new
awards of comparable value, the outstanding Awards, in either case, shall
terminate and thereupon become null and void; provided, however, that, if the
surviving or acquiring corporation does not assume the outstanding Awards or
replace the outstanding Awards with new awards of comparable value, then the
Recipients of such outstanding Awards shall have the right, during the period
following adoption of the plan of dissolution, liquidation or Reorganization by
the Board, or approval of any agreement with respect to an Asset Sale or Stock
Sale by the Board, and prior to or concurrently with consummation of such plan
or agreement (which period shall be no less than 20 days), to exercise their
outstanding Awards to the full extent then exercisable and not theretofore
exercised, and the Company shall give the Recipients of such outstanding Awards
written notice of such right prior to the commencement of such period. With
respect to Restricted Stock previously issued under this Plan, the surviving
corporation or acquiring corporation may elect to replace the outstanding
Restricted Stock with new restricted stock of comparable value; provided,
however, that, if the surviving or acquiring corporation does not replace the
outstanding Restricted Stock with new restricted stock of comparable value, then
all


                                       2
<PAGE>   3

restrictions on such outstanding Restricted Stock shall terminate and lapse as
of the date of the consummation of such plan of dissolution, liquidation or
Reorganization by the Board, or approval of any agreement with respect to an
Asset Sale or Stock Sale by the Board.

            (b) No Fractional Interests. No fractional interests will be issued
under the Plan resulting from any adjustments.

            (c) Adjustments Related to Company Stock. To the extent any
adjustments relate to stock or securities of the Company, such adjustments will
be made by the Administrator, whose determination in that respect will be final,
binding and conclusive.

            (d) Right to Make Adjustment. The grant of an Award will not affect
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 or to consolidate or to dissolve, liquidate or sell, or
transfer all or any part of its business or assets.

            (e) Limitations. No adjustment to the terms of an Incentive Stock
Option may be made unless such adjustment either: (i) would not cause the Option
to lose its status as an Incentive Stock Option; or (ii) is agreed to in writing
by the Administrator and the Recipient.

        3.5 RESERVATION OF SHARES. The Company will at all times reserve and
keep available shares of Common Stock equaling at least the total number of
shares of Common Stock issuable pursuant to all outstanding Awards.


                                   ARTICLE IV
                             ADMINISTRATION OF PLAN


        4.1 ADMINISTRATOR.

            (a) Plan Administration. This Plan will be administered by the Board
and may also be administered by a Committee of the Board appointed pursuant to
Section 4.1(b).

            (b) Administration by Committee. The Board in its sole discretion
may from time to time appoint a Committee of not less than two (2) Board members
with authority to administer this Plan in whole or part and, subject to
applicable law, to exercise any or all of the powers, authority and discretion
of the Board under this Plan. The Board may from time to time increase or
decrease (but not below two (2)) the number of members of the Committee, remove
from membership on the Committee all or any portion of its members, and/or
appoint such person or persons as it desires to fill any vacancy existing on the
Committee, whether caused by removal, resignation or otherwise. The Board may
disband the Committee at any time.

        4.2 AUTHORITY OF ADMINISTRATOR.

            (a) Authority to Interpret Plan. Subject to the express provisions
of this Plan, the Administrator will have the power to implement, interpret and
construe this Plan and any Awards and Award Documents or other documents
defining the rights and obligations of the Company and Recipients hereunder and
thereunder, to determine all questions arising hereunder and thereunder, and to
adopt and amend such rules and regulations for the administration hereof and
thereof as it may deem desirable. The interpretation and construction by the
Administrator of any provisions of this Plan or of any Award or Award Document,
and any action taken by, or inaction of, the Administrator relating to this Plan
or any Award or Award Document, will be within the discretion of the
Administrator and will


                                       3
<PAGE>   4

be conclusive and binding upon all persons. Subject only to compliance with the
express provisions hereof, the Administrator may act in its discretion in
matters related to this Plan and any and all Awards and Award Documents.

            (b) Authority to Grant Awards. Subject to the express provisions of
this Plan, the Administrator may from time to time in its discretion select the
Eligible Persons to whom, and the time or times at which, Awards will be granted
or sold, the nature of each Award, the number of shares of Common Stock or the
number of rights that make up or underlie each Award, the exercise price and
period (if applicable) for the exercise of each Award, and such other terms and
conditions applicable to each individual Award as the Administrator may
determine. Any and all terms and conditions of Awards may be established by the
Administrator without regard to existing Awards or other grants and without
incurring any obligation of the Company in respect of subsequent Awards. The
Administrator may grant at any time new Awards to an Eligible Person who has
previously received Awards or other grants (including other stock options)
regardless of the status of such other Awards or grants. The Administrator may
grant Awards singly or in combination or in tandem with other Awards as it
determines in its discretion.

            (c) Procedures. Subject to the Company's charter or bylaws or any
Board resolution conferring authority on the Committee, any action of the
Administrator with respect to the administration of this Plan must be taken
pursuant to a majority vote of the authorized number of members of the
Administrator or by the unanimous written consent of its members; provided,
however, that (i) if the Administrator is the Committee and consists of two (2)
members, then actions of the Administrator must be unanimous, and (ii) actions
taken by the Board will be valid if approved in accordance with applicable law.

        4.3 NO LIABILITY. No member of the Board or the Committee or any
designee thereof will be liable for any action or inaction with respect to this
Plan or any Award or any transaction arising under this Plan or any Award except
in circumstances constituting bad faith of such member.

        4.4 AMENDMENTS.

            (a) Plan Amendments. The Administrator may at any time and from time
to time in its discretion, insofar as permitted by applicable law, rule or
regulation and subject to Section 4.4(c), suspend or discontinue this Plan or
revise or amend it in any respect whatsoever, and this Plan as so revised or
amended will govern all Awards; provided, however, that no such suspension,
discontinuation, revision or amendment shall deprive the Recipient of any Award
theretofore granted under this Plan, without the consent of such Recipient, of
any of his or her rights thereunder or with respect thereto; and, provided
further, that the approval of the holders of a majority of the outstanding
shares of the Company shall be required for the adoption of any amendments to
this Plan which would alter the class of Eligible Persons or which would
increase the number of shares subject to this Plan other than an increase
pursuant to Section 3.4(a) hereof. Without limiting the generality of the
foregoing, the Administrator is authorized to amend this Plan to comply with or
take advantage of amendments to applicable laws, rules or regulations, including
the Securities Act, the Exchange Act, the IRC, or the rules of any exchange or
market system upon which the Common Stock is listed or trades, or any rules or
regulations promulgated thereunder. Except as otherwise provided in this Section
4.4(a), no shareholder approval of any amendment or revision will be required
unless such approval is required by applicable law,


                                       4
<PAGE>   5

rule or regulation.

            (b) Award Amendments. The Administrator may at any time and from
time to time in its discretion, subject to Section 4.4(c) and compliance with
applicable statutory or administrative requirements, accelerate the vesting or
exercise period of any Award as a whole or in part, and make such other
modifications in the terms and conditions of an Award as it deems advisable.

            (c) Limitation. Except as otherwise provided in this Plan or in the
applicable Award Document, no amendment, revision, suspension or termination of
this Plan or an outstanding Award that would cause an Incentive Stock Option to
cease to qualify as such or that would alter, impair or diminish in any material
respect any rights or obligations under any Award theretofore granted under this
Plan may be effected without the written consent of the Recipient to whom such
Award was granted.

        4.5 OTHER COMPENSATION PLANS. The adoption of this Plan will not affect
any other stock option, incentive or other compensation plans in effect from
time to time for the Company, and this Plan will not preclude the Company from
establishing any other forms of incentive or other compensation for employees,
directors, advisors or consultants of the Company, whether or not approved by
shareholders.

        4.6 PLAN BINDING ON SUCCESSORS. This Plan will be binding upon the
successors and assigns of the Company.

        4.7 REFERENCES TO SUCCESSOR STATUTES, REGULATIONS AND RULES. Any
reference in this Plan to a particular statute, regulation or rule will also
refer to any successor provision of such statute, regulation or rule.

        4.8 INVALID PROVISIONS. In the event that any provision of this Plan is
found to be invalid or otherwise unenforceable under any applicable law, such
invalidity or unenforceability is not to be construed as rendering any other
provisions contained herein invalid or unenforceable, and all such other
provisions are to be given full force and effect to the same extent as though
the invalid and unenforceable provision were not contained herein.

        4.9 GOVERNING LAW. This Agreement will be governed by and interpreted in
accordance with the internal laws of the State of California, without giving
effect to the principles of the conflicts of laws thereof, provided that this
will not be construed to apply the California Securities Law or the California
Securities Rules to securities or holders thereof to which the California
Securities Law or the California Securities Rules would not otherwise apply.

        4.10 INTERPRETATION. Headings herein are for convenience of reference
only, do not constitute a part of this Plan, and will not affect the meaning or
interpretation of this Plan. References herein to Sections or Articles are
references to the referenced Section or Article hereof, unless otherwise
specified.


                                    ARTICLE V
                            GENERAL AWARD PROVISIONS


        5.1 PARTICIPATION IN PLAN.

            (a) Eligibility to Receive Awards. A person is eligible to receive
grants of Awards if, at the time of the grant of the Award, such person is an
Eligible Person or has received an offer of employment from the Company or any
Affiliated Entity, provided that


                                       5
<PAGE>   6

Awards granted to a person who has received an offer of employment will
terminate and be forfeited without consideration if the employment offer is not
accepted within such time as may be specified by the Company. Status as an
Eligible Person will not be construed as a commitment that any Award will be
granted under this Plan to an Eligible Person or to Eligible Persons generally.

            (b) Eligibility to Receive Incentive Stock Options. Incentive Stock
Options may be granted only to Eligible Persons meeting the employment
requirements of Section 422 of the IRC.

            (c) Awards to Foreign Nationals. Notwithstanding anything to the
contrary herein, the Administrator may, in order to fulfill the purposes of this
Plan, modify grants of Awards to Recipients who are foreign nationals or
employed outside of the United States to recognize differences in applicable
law, tax policy or local custom.

        5.2 AWARD DOCUMENTS. Each Award must be evidenced by an agreement duly
executed on behalf of the Company and by the Recipient setting forth such terms
and conditions applicable to the Award as the Administrator may in its
discretion determine. Awards will not be deemed made or binding upon the
Company, and Recipients will have no rights thereto, until such an agreement is
entered into between the Company and the Recipient but an Award may have an
effective date prior to the date of such an agreement. Award Documents may be
(but need not be) identical and must comply with and be subject to the terms and
conditions of this Plan, a copy of which will be provided to each Recipient and
incorporated by reference into each Award Document. Any Award Document may
contain such other terms, provisions and conditions not inconsistent with this
Plan as may be determined by the Administrator. In case of any conflict between
this Plan and any Award Document, this Plan shall control.

        5.3 PAYMENT FOR AWARDS.

            (a) Payment of Exercise Price. The exercise price or other payment
for an Award is payable upon the exercise of a Stock Option or upon other
purchase of shares pursuant to an Award granted hereunder by delivery of legal
tender of the United States or payment of such other consideration as the
Administrator may from time to time deem acceptable in any particular instance;
provided, however, that the Administrator may, in the exercise of its
discretion, allow exercise of an Award in a broker-assisted or similar
transaction in which the exercise price is not received by the Company until
promptly after exercise.

            (b) Company Assistance. The Company may assist any person to whom an
Award is granted (including, without limitation, any officer or director of the
Company) in the payment of the purchase price or other amounts payable in
connection with the receipt or exercise of that Award, by lending such amounts
to such person on such terms and at such rates of interest and upon such
security (if any) as may be consistent with applicable law and approved by the
Administrator. In case of such a loan, the Administrator may require that the
exercise be followed by a prompt sale of some or all of the underlying shares
and that a portion of the sale proceeds be dedicated to full payment of the
exercise price and amounts required pursuant to Section 5.9.

            (c) Cashless Exercise. If permitted in any case by the Administrator
in its discretion, the exercise price for Awards may be paid by capital stock of
the Company delivered in transfer to the Company by or on behalf of the person
exercising the Award and

                                       6
<PAGE>   7

duly endorsed in blank or accompanied by stock powers duly endorsed in blank,
with signatures guaranteed in accordance with the Exchange Act if required by
the Administrator; or retained by the Company from the stock otherwise issuable
upon exercise or surrender of vested and/or exercisable Awards or other equity
awards previously granted to the Recipient and being exercised (if applicable)
(in either case valued at Fair Market Value as of the exercise date); or such
other consideration as the Administrator may from time to time in the exercise
of its discretion deem acceptable in any particular instance.

            (d) No Precedent. Recipients will have no rights to the assistance
described in Section 5.3(b) or the exercise techniques described in Section
5.3(c), and the Company may offer or permit such assistance or techniques on an
ad hoc basis to any Recipient without incurring any obligation to offer or
permit such assistance or techniques on other occasions or to other Recipients.

        5.4 NO EMPLOYMENT RIGHTS. Nothing contained in this Plan (or in Award
Documents or in any other documents related to this Plan or to Awards) will
confer upon any Eligible Person or Recipient any right to continue in the employ
of or engagement by the Company or any Affiliated Entity or constitute any
contract or agreement of employment or engagement, or interfere in any way with
the right of the Company or any Affiliated Entity to reduce such person's
compensation or other benefits or to terminate the employment or engagement of
such Eligible Person or Recipient, with or without cause. Except as expressly
provided in this Plan or in any statement evidencing the grant of an Award, the
Company has the right to deal with each Recipient in the same manner as if this
Plan and any such statement evidencing the grant of an Award did not exist,
including, without limitation, with respect to all matters related to the
hiring, discharge, compensation and conditions of the employment or engagement
of the Recipient. Unless otherwise set forth in a written agreement binding upon
the Company or an Affiliated Entity, all employees of the Company or an
Affiliated Entity are "at will" employees whose employment may be terminated by
the Company or the Affiliated Entity at any time for any reason or no reason,
without payment or penalty of any kind. Any question(s) as to whether and when
there has been a termination of a Recipient's employment or engagement, the
reason (if any) for such termination, and/or the consequences thereof under the
terms of this Plan or any statement evidencing the grant of an Award pursuant to
this Plan will be determined by the Administrator, and the Administrator's
determination thereof will be final and binding.

        5.5 RESTRICTIONS UNDER APPLICABLE LAWS AND REGULATIONS.

            (a) Government Approvals. All Awards will be subject to the
requirement that, if at any time the Company determines, in its discretion, that
the listing, registration or qualification of the securities subject to Awards
granted under this Plan upon any securities exchange or interdealer quotation
system or under any federal, state or foreign law, or the consent or approval of
any government or regulatory body, is necessary or desirable as a condition of,
or in connection with, the granting of such an Award or the issuance, if any, or
purchase of shares in connection therewith, such Award may not be exercised as a
whole or in part unless and until such listing, registration, qualification,
consent or approval has been effected or obtained free of any conditions not
acceptable to the Company. During the term of this Plan, the Company will use
its reasonable efforts to seek to obtain from the appropriate governmental and
regulatory agencies any requisite qualifications, consents, approvals or
authorizations in order to issue and sell such number of shares of its Common

                                       7
<PAGE>   8

Stock as is sufficient to satisfy the requirements of this Plan. The inability
of the Company to obtain any such qualifications, consents, approvals or
authorizations will relieve the Company of any liability in respect of the
nonissuance or sale of such stock as to which such qualifications, consents,
approvals or authorizations pertain.

            (b) No Registration Obligation; Recipient Representations. The
Company will be under no obligation to register or qualify the issuance of
Awards or underlying securities under the Securities Act or applicable state
securities laws. Unless the issuance of Awards and underlying securities have
been registered under the Securities Act and qualified or registered under
applicable state securities laws, the Company shall be under no obligation to
issue any Awards or underlying securities unless the Awards and underlying
securities may be issued pursuant to applicable exemptions from such
registration or qualification requirements. In connection with any such exempt
issuance, the Administrator may require the Recipient to provide a written
representation and undertaking to the Company, satisfactory in form and scope to
the Company, that such Recipient is acquiring such Awards and underlying
securities for such Recipient's own account as an investment and not with a view
to, or for sale in connection with, the distribution of any such securities, and
that such person will make no transfer of the same except in compliance with any
rules and regulations in force at the time of such transfer under the Securities
Act and other applicable law, and that if securities are issued without
registration, a legend to this effect (together with any other legends deemed
appropriate by the Administrator) may be endorsed upon the securities so issued,
and to the effect of any additional representations that are appropriate in
light of applicable securities laws and rules. The Company may also order its
transfer agent to stop transfers of such shares. The Administrator may also
require the Recipient to provide the Company such information and other
documents as the Administrator may request in order to satisfy the Administrator
as to the investment sophistication and experience of the Recipient and as to
any other conditions for compliance with any such exemptions from registration
or qualification.

        5.6 NO PRIVILEGES RE: STOCK OWNERSHIP OR SPECIFIC ASSETS. Except as
otherwise set forth herein, a Recipient or a permitted transferee of an Award
will have no rights as a shareholder with respect to any shares issuable or
issued in connection with the Award until the Recipient has delivered to the
Company all amounts payable and performed all obligations required to be
performed in connection with exercise of the Award and the Company has issued
such shares. No person will have any right, title or interest in any fund or in
any specific asset (including shares of capital stock) of the Company by reason
of any Award granted hereunder. Neither this Plan (or any documents related
hereto) nor any action taken pursuant hereto is to be construed to create a
trust of any kind or a fiduciary relationship between the Company and any
person. To the extent that any person acquires a right to receive an Award
hereunder, such right shall be no greater than the right of any unsecured
general creditor of the Company.

        5.7 NONASSIGNABILITY. No Award is assignable or transferable except: (a)
by will or by the laws of descent and distribution; or (b) subject to the final
sentence of this Section 5.7, upon dissolution of marriage pursuant to a
qualified domestic relations order or, in the discretion of the Administrator
and under circumstances that would not adversely affect the interests of the
Company, transfers for estate planning purposes or pursuant to a nominal
transfer that does not result in a change in beneficial ownership. During the
lifetime of a

                                       8
<PAGE>   9

Recipient, an Award granted to such person will be exercisable only by the
Recipient (or the Recipient's permitted transferee) or such person's guardian or
legal representative. Notwithstanding the foregoing, Stock Options and stock
purchase rights that are California Regulated Securities may not be transferred
other than by will or the laws of descent and distribution at any time that this
Plan is a California Regulated Plan, and Stock Options intended to be treated as
Incentive Stock Options (or other Awards subject to transfer restrictions under
the IRC) may not be assigned or transferred in violation of Section 422(b)(5) of
the IRC or the regulations thereunder, and nothing herein is intended to allow
such assignment or transfer.

        5.8 INFORMATION TO RECIPIENTS.

            (a) Provision of Information. The Administrator in its sole
discretion may determine what, if any, financial and other information is to be
provided to Recipients and when such financial and other information is to be
provided after giving consideration to applicable federal and state laws, rules
and regulations, including, without limitation, applicable federal and state
securities laws, rules and regulations, provided that during such times as this
Plan is a California Regulated Plan, holders of California Regulated Securities
will receive financial statements of the Company to the extent required by the
California Securities Rules.

            (b) Confidentiality. The furnishing of financial and other
information that is confidential to the Company is subject to the Recipient's
agreement to maintain the confidentiality of such financial and other
information, and not to use the information for any purpose other than
evaluating the Recipient's position under this Plan. The Administrator may
impose other restrictions on the access to and use of such confidential
information and may require a Recipient to acknowledge the Recipient's
obligations under this Section 5.8(b) (which acknowledgment is not to be a
condition to Recipient's obligations under this Section 5.8(b)).

        5.9 WITHHOLDING TAXES. Whenever the granting, vesting or exercise of any
Award, or the issuance of any securities upon exercise of any Award or transfer
thereof, gives rise to tax or tax withholding liabilities or obligations, the
Administrator will have the right as a condition thereto to require the
Recipient to remit to the Company an amount sufficient to satisfy any federal,
state and local withholding tax requirements arising in connection therewith.
The Administrator may, in the exercise of its discretion, allow satisfaction of
tax withholding requirements by accepting delivery of stock of the Company or by
withholding a portion of the stock otherwise issuable in connection with an
Award, in each case valued at Fair Market Value as of the date of such delivery
or withholding, as the case may be, is determined.

        5.10 LEGENDS ON AWARDS AND STOCK CERTIFICATES. Each Award Document and
each certificate representing securities acquired upon vesting or exercise of an
Award must be endorsed with all legends, if any, required by applicable federal
and state securities and other laws to be placed on the Award Document and/or
the certificate. The determination of which legends, if any, will be placed upon
Award Documents or the certificates will be made by the Administrator in its
discretion and such decision will be final and binding.

        5.11 EFFECT OF TERMINATION OF EMPLOYMENT ON AWARDS.

            (a) Termination of Vesting. Notwithstanding anything to the contrary
herein, but subject to Section 5.11(b), Awards will be exercisable by a
Recipient (or the

                                       9
<PAGE>   10

Recipient's successor in interest) following such Recipient's termination of
employment only to the extent that installments thereof had become exercisable
on or prior to the date of such termination. (b) Alteration of Vesting and
Exercise Periods. Notwithstanding anything to the contrary herein, the
Administrator may in its discretion (i) designate shorter or longer periods
following a Recipient's termination of employment during which Awards may vest
or be exercised; provided, however, that any shorter periods determined by the
Administrator will be effective only if provided for in this Plan or the
instrument that evidences the grant to the Recipient of the affected Award or if
such shorter period is agreed to in writing by the Recipient, and (ii)
accelerate the vesting of all or any portion of any Awards by increasing the
number of shares purchasable at any time.

            (c) Leave of Absence. In the case of any employee on an approved
leave of absence, the Administrator may make such provision respecting
continuance of Awards granted to such employee as the Administrator in its
discretion deems appropriate, except that in no event will an Award be
exercisable after the date such Award would expire in accordance with its terms
had the Recipient remained continuously employed.

            (d) General Cessation. Except as otherwise set forth in this Plan or
an Award Document or as determined by the Administrator in its discretion, all
Awards granted to a Recipient, and all of such Recipient's rights thereunder,
will terminate upon termination for any reason of such Recipient's employment
with the Company or any Affiliated Entity (or cessation of any other service
relationship between the Recipient and the Company or any Affiliated Entity in
place as of the date the Award was granted).

        5.12 RESTRICTIONS ON COMMON STOCK AND OTHER SECURITIES. Common Stock or
other securities of the Company issued or issuable in connection with any Award
will be subject to all of the restrictions imposed under this Plan upon Common
Stock issuable or issued upon exercise of Stock Options, except as otherwise
determined by the Administrator.


                                   ARTICLE VI
                                     AWARDS


        6.1 STOCK OPTIONS.

            (a) Nature of Stock Options. Stock Options may be Incentive Stock
Options or Nonqualified Stock Options.

            (b) Option Exercise Price. The exercise price for each Stock Option
will be determined by the Administrator as of the date such Stock Option is
granted. Subject to Section 4.4(b), the exercise price may be greater than or
less than the Fair Market Value of the Common Stock subject to the Stock Option
as of the date of grant, provided that in no event may the exercise price per
share be less than the par value, if any, per share of the Common Stock subject
to the Stock Option, and provided further that the exercise price of Stock
Options that are California Regulated Securities granted while this Plan is a
California Regulated Plan may not be less than 85% of the Fair Market Value of
the Common Stock as of the date of grant, or 110% of the Fair Market Value of
the Common Stock as of the date of grant in the case of Stock Options granted to
Recipients owning stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or its parent or subsidiary
corporations.

            (c) Option Period and Vesting. Stock Options granted hereunder will
vest

                                       10
<PAGE>   11

and may be exercised as determined by the Administrator, except that (i) Stock
Options that are California Regulated Securities granted while this Plan is a
California Regulated Plan will vest and become exercisable at the rate of at
least 20% per year over five years from the date of grant, and (ii) exercise of
Stock Options after termination of the Recipient's employment shall be subject
to Section 5.11. Each Stock Option granted hereunder and all rights or
obligations thereunder shall expire on such date as may be determined by the
Administrator, but not later than ten (10) years after the date the Stock Option
is granted and may be subject to earlier termination as provided herein or in
the Award Document. Except as otherwise provided herein, a Stock Option will
become exercisable, as a whole or in part, on the date or dates specified by the
Administrator and thereafter will remain exercisable until the exercise,
expiration or earlier termination of the Stock Option.

            (d) Exercise of Stock Options. The exercise price for Stock Options
will be paid as set forth in Section 5.3. No Stock Option will be exercisable
except in respect of whole shares, and fractional share interests shall be
disregarded. Not fewer than 100 shares of Common Stock may be purchased at one
time and Stock Options must be exercised in multiples of 100 unless the number
purchased is the total number of shares for which the Stock Option is
exercisable at the time of exercise. A Stock Option will be deemed to be
exercised when the Secretary or other designated official of the Company
receives written notice of such exercise from the Recipient in the form of
Exhibit A hereto or such other form as the Company may specify from time to
time, together with payment of the exercise price in accordance with Section 5.3
and any amounts required under Section 5.9 or, with permission of the
Administrator, arrangement for such payment. Notwithstanding any other provision
of this Plan, the Administrator may impose, by rule and/or in Award Documents,
such conditions upon the exercise of Stock Options (including, without
limitation, conditions limiting the time of exercise to specified periods) as
may be required to satisfy applicable regulatory requirements, including,
without limitation, Rule 16b-3 and Rule 10b-5 under the Exchange Act, and any
amounts required under Section 5.9, or any applicable section of or regulation
under the IRC. If required by the Administrator, the Recipient shall pay to the
Company the reasonable expenses incurred by the Company in issuing a certificate
for any shares of Common Stock issued pursuant to the exercise of a Stock
Option, if such exercise is for less than all of the shares as to which the
Stock Option has become exercisable.

            (e) Termination of Employment.

                (i) Termination for Just Cause. Subject to Section 5.11 and
except as otherwise provided in a written agreement between the Company or an
Affiliated Entity and the Recipient, which may be entered into at any time
before or after termination of employment, or, with respect to California
Regulated Securities, as required by the California Securities Rules while this
Plan is a California Regulated Plan, in the event of a Just Cause Dismissal of a
Recipient all of the Recipient's unexercised Stock Options, whether or not
vested, will expire and become unexercisable as of the date of such Just Cause
Dismissal.

                (ii) Termination Other Than for Just Cause. Subject to Section
5.11 and except as otherwise provided in a written agreement between the Company
or an Affiliated Entity and the Recipient, which may be entered into at any time
before or after termination of employment, if a Recipient's employment with the
Company or any Affiliated Entity terminates for:

                    (A) any reason other than for Just Cause Dismissal, death,

                                       11
<PAGE>   12

Permanent Disability or Retirement, the Recipient's Awards, whether or not
vested, will expire and become unexercisable as of the earlier of: (A) the date
such Stock Options would expire in accordance with their terms had the Recipient
remained employed; and (B) 90 days after the date of employment termination in
the case of Stock Options intended to be treated as Incentive Stock Options, or
30 days after the date of employment termination in the case of Nonqualified
Stock Options.

                    (B) death or Permanent Disability or Retirement, the
Recipient's unexercised Awards will, whether or not vested, expire and become
unexercisable as of the earlier of: (A) the date such Awards would expire in
accordance with their terms had the Recipient remained employed; and (B) 365
days after the date of employment termination.

            (f) Special Provisions Regarding Incentive Stock Options.
Notwithstanding anything herein to the contrary,

                (i) The exercise price and vesting period of any Stock Option
intended to be treated as an Incentive Stock Option must comply with the
provisions of Section 422 of the IRC and the regulations thereunder. As of the
Effective Date, such provisions require, among other matters, that: (A) the
exercise price must not be less than the Fair Market Value of the underlying
stock as of the date the Incentive Stock Option is granted, and not less than
110% of the Fair Market Value as of such date in the case of a grant to a
Significant Shareholder; and (B) that the Incentive Stock Option not be
exercisable after the expiration of ten (10) years from the date of grant or the
expiration of five (5) years from the date of grant in the case of an Incentive
Stock Option granted to a Significant Shareholder.

                (ii) The aggregate Fair Market Value (determined as of the
respective date or dates of grant) of the Common Stock for which one or more
Stock Options granted to any Recipient under this Plan (or any other option plan
of the Company or any of its subsidiaries or affiliates) may for the first time
become exercisable as Incentive Stock Options under the federal tax laws during
any one calendar year may not exceed $100,000.

                (iii) Any Stock Options granted as Incentive Stock Options
pursuant to this Plan that for any reason fail or cease to qualify as such will
be treated as Nonqualified Stock Options. If the limit described in Section
6.1(f)(ii) is exceeded, the earliest granted Stock Options will be treated as
Incentive Stock Options, up to such limit.


                                   ARTICLE VII
                     RIGHTS OF REPURCHASE AND FIRST REFUSAL


        7.1 RIGHT OF REPURCHASE.

        (a) In the event that any of the events specified in Section 7.1(b)
below occur, then, with respect to any of the shares previously acquired upon
exercise of or in connection with any Award prior to the occurrence of such
event, within 90 days following the occurrence of such event, and, with respect
to any of the shares acquired upon exercise of or in connection with any Award
after occurrence of such event, within 90 days following the date of such
exercise or acquisition (in either case, the "REPURCHASE PERIOD"), the Company
shall have the option, but not the obligation, to repurchase all, but not a
portion of, such shares (the "AWARD SHARES") from the Recipient, or his or her
legal representative, as the

                                       12
<PAGE>   13

case may be, at the Repurchase Price (as defined hereinafter) of such shares
(the "REPURCHASE OPTION"). The Repurchase Option shall be exercised by the
Company giving Recipient, or his or her legal representative, written notice of
its intention to exercise the Repurchase Option on or before the last day of the
Repurchase Period. The Company may, in exercising the Repurchase Option,
designate one or more nominees to purchase the Award Shares, either with or
without the participation of the Company.

        (b) The Company shall have the Repurchase Option in the event that any
of the following occur:

        (1) The termination of Recipient's employment with the Company or an
Affiliated Entity voluntarily or involuntarily for any reason whatsoever. The
Repurchase Period with respect to Award Shares acquired prior to the cessation
of employment shall commence on the date on which the Recipient ceases to be an
employee of the Company or an Affiliated Entity. The Repurchase Period with
respect to Award Shares acquired subsequent to such date shall commence on the
date the Recipient acquires such shares. The Repurchase Price of the Award
Shares shall be determined as of the last day of the month preceding the month
in which the Recipient ceases to be employed.

        (2) The receivership, bankruptcy or other creditors proceeding regarding
Recipient or the taking of any of the Award Shares by legal process, such as a
levy of execution, whether or not Recipient then is employed by the Company or
an Affiliated Entity. The Repurchase Period shall commence on the date the
Company receives actual notice of the commencement of pendency of the
receivership, bankruptcy or other creditor's proceeding, or the date of such
taking, as the case may be. The Repurchase Price of the Award Shares shall be
determined as of the last day of the month preceding the month in which the
proceeding involved commenced or the taking occurred.

        (3) Distribution of any of the Award Shares by Recipient to his or her
spouse as such spouse's joint or community interest pursuant to a decree of
dissolution, property settlement agreement or for any other reason, except as
may be otherwise permitted by the Company, whether or not Recipient then is
employed by the Company or an Affiliated Entity. The Repurchase Period shall be
deemed to commence on the day the Company receives actual notice of such
distribution. The Repurchase Price of the Award Shares shall be determined as of
the last day of the month preceding the month in which the decree, agreement or,
if there is no decree or agreement, the distribution occurs.

        (c) the Repurchase Price of the Award Shares, as used in this Section
7.1, shall be an amount per share determined on the basis of the price at which
shares of the Common Stock could reasonably be expected to be sold in an
arms-length transaction, for cash, other than on an installment basis, to a
person not employed by, controlled by, in control of or under common control
with the Company, as follows:

        (1) the Repurchase Price shall initially be determined by the Board,
giving due consideration to recent transactions involving shares of the Common
Stock, if any, earnings of the Company to the date of such determination, the
absence of a public market for the Common Stock, and such other matters as the
Board deems pertinent (the "BOARD VALUATION"), and the Repurchase Price need not
necessarily be equal to the Fair Market Value as determined in accordance with
this Agreement;

        (2) Recipient shall have the right, exercisable by written request to
the Company, to review the assumptions, calculations and information used by the
Board in determining the

                                       13
<PAGE>   14

Board Valuation and shall have 20 days after Recipient's receipt of the Board
Valuation to give written notice to the Company of any disagreement with the
Board Valuation, indicating the Repurchase Price Recipient attributes to the
Award Shares (the "RECIPIENT VALUATION") and specifying in reasonable detail,
insofar as feasible, the nature and extent of Recipient's disagreement with the
Board Valuation; provided, however, if the Recipient fails to provide any notice
of disagreement within such 20 day period, the Repurchase Price shall be the
Board Valuation and such Repurchase Price shall be binding on the parties, and
such binding amount shall be final and shall not be subject to review or
challenge of any kind;

        (3) if the Recipient gives timely written notice under Section 7.1(c)(2)
above, the Company and Recipient shall then attempt to agree upon a mutually
acceptable Repurchase Price for the Award Shares; if the Company and Recipient
are unable to reach agreement as to Repurchase Price within 10 days after
Recipient gives the Company notice of the Recipient Valuation, the disagreement
shall be referred for final determination to the Los Angeles office of Deloitte
& Touche LLP, or if Deloitte & Touche LLP is unwilling to serve, such other
independent accounting firm of national recognition that the Board selects in
good faith (the "INDEPENDENT ACCOUNTING FIRM"), which shall make a final
determination regarding such disagreement within 30 days after referral thereof;

        (4) any determination with respect to the Repurchase Price of the Award
Shares made by the Independent Accounting Firm shall be made on the basis of the
application of the standards set forth in this Section 7.1(c), and the decision
of the Independent Accounting Firm (the "ACCOUNTANT VALUATION") shall be final
and binding and shall not be subject to review or challenge of any kind;
provided, however, that if the Accountant Valuation is less than the Board
Valuation, the Board Valuation shall be binding on the parties and if the
Accountant Valuation is greater than the Recipient Valuation, the Recipient
Valuation shall be binding on the parties, and in either case, such binding
amount shall be final and shall not be subject to review or challenge of any
kind; and

        (5) the Company and Recipient shall each pay one-half of the fees and
disbursements of the Independent Accounting Firm, if any.

        7.2 RIGHT OF FIRST REFUSAL.

        (a) If at any time, whether during the continuance of Recipient's
employment by the Company or an Affiliated Entity, or thereafter, Recipient, or
his or her legal representative, as the case may be (a "SELLER"), desires to
sell, transfer (by gift or otherwise), assign, hypothecate, pledge, grant as a
security interest, or in any other way dispose of or alienate any of the Award
Shares or any interest therein (other than by gift to the spouse, parents or
children of Recipient or to the parents or children of the spouse of Recipient
or to a trust established solely for the benefit of any one or more of such
persons (a "PERMITTED TRANSFER"), then prior to such transfer, (i) Seller shall
obtain a written agreement satisfactory to the Company that such intended
transferee (the "Transferee") agrees, prior to the transfer, in a writing
acceptable to the Company to hold such shares subject to the terms of Section
7.1 hereof and this Section 7.2), (hereinafter referred to as a "DISPOSITION")
and (ii) the Seller shall give written notice to the Company of Seller's intent
to make a Disposition of such shares (the "FIRST REFUSAL OFFER"). The First
Refusal Offer shall contain a statement signed by the Seller notifying the
Company that the Seller desires to make a Disposition of a specified number of
the Award Shares or an interest therein and shall be accompanied by a copy of
the bona fide offer to purchase such shares, in case of a sale, or a description
of the

                                       14
<PAGE>   15

proposed transaction with respect to any other Disposition, and shall set forth
the following:

        (1) The full name and address of the Transferee;

        (2) The number of the Award Shares to be purchased by, or transferred
to, the Transferee;

        (3) The price, in case of a sale, and other terms under which the
purchase is intended to be made;

        (4) A statement, in case of a sale, signed by the Transferee, that the
price and other terms specified are a bona fide offer to purchase; and

        (5) A representation, in case of a sale, by the Transferee that he or
she or it has the financial capability necessary to consummate the purchase.

        (b) The Company shall have 30 days from the date of receipt of the First
Refusal Offer within which to exercise an option to purchase the Award Shares
covered by a First Refusal Offer (the "FIRST REFUSAL SHARES"), at the same price
and upon the same terms as set forth in such First Refusal Offer (the "FIRST
REFUSAL OPTION"), by giving the Seller written notice of its intention to
exercise such right. The Company may, in exercising the First Refusal Option,
designate one or more nominees to purchase the First Refusal Shares, either with
or without the participation of the Company. The First Refusal Option shall
apply to all, but not less than all, of the First Refusal Shares.
Notwithstanding the generality of the foregoing, however, the purchase price for
the First Refusal Shares may, at the option of the Company, be paid (1) in the
same manner provided in the First Refusal Offer, (2) in cash in an amount equal
to the present value of any payments to be made over a period of time according
to the terms of the First Refusal Offer, (3) by use of a promissory note, or (4)
if the terms specified in the First Refusal Offer state that payment is to be
made in property, in an amount equal to the Fair Market Value of such property
as of the date the Company receives the First Refusal Offer, as determined in
good faith and on any reasonable basis, by the Board. For purposes of any
computation made pursuant to this paragraph, the present value of any amount to
be paid in the future shall be determined by the Board by discounting such
amount using an interest rate of 10%.

        (c) If the Seller desires to make a Disposition of any of the Award
Shares other than by sale, including, without limitation, by gift, pledge,
hypothecation or the grant of a security interest, other than a permitted
transfer, the Seller shall obtain the prior written approval of the Company to
the proposed transfer, which approval the Company may give or withhold in its
sole discretion.

        (d) If the First Refusal Shares are not purchased pursuant to the
related First Refusal Offer by the Company in accordance with this Section 7.2,
in the case of a proposed sale, or if the Company approves a Disposition other
than by sale, the Seller may make a bona fide transfer of the First Refusal
Shares to the respective transferee or transferees named in the related First
Refusal Offer; provided, however, that (1) such transfer shall only be made in
strict accordance with the terms stated in such First Refusal Offer, and
immediately following such transfer, the transferor shall so certify in writing
to the Company, and (2) before any such transfer shall become effective or be
recorded in the books of the Company, each transferee of the First Refusal
Shares shall agree in writing to hold such shares subject to the terms of this
Agreement. In the event the Recipient does not make such transfer for a period
of 60 days following the date on which the Company receives the First Refusal
Offer, no transfer of the First Refusal Shares covered by the First Refusal
Offer shall be made

                                       15
<PAGE>   16

without a new First Refusal Offer from the Seller to the Company in accordance
with this Section 7.2 and in full compliance with all provisions hereof.

        7.3 CLOSING. The closing with respect to a purchase of shares by the
Company pursuant to Section 7.1 or 7.2 hereof (the "CLOSING") shall occur at the
principal executive office of the Company on the date and time agreed to by the
parties, but if no such agreement is reached, the Closing shall occur at 10:00
a.m., local time, on the last business day of the 30-day period beginning with
the last day of the Repurchase Period or the First Refusal Period, as the case
may be.

        7.4 DELIVERIES AT CLOSING. At the Closing, (a) Recipient or his or her
legal representative, as the case may be, shall deliver to the Company or its
designee, as the case may be, (1) share certificate(s), duly endorsed for
transfer, representing the Award Shares or the First Refusal Shares, as the case
may be, to be purchased at such Closing, and (2) a written statement from
Recipient or his or her legal representative, as the case may be, that such
shares are owned by such person, free and clear of any liens, claims, pledges,
security interests or other encumbrances (other than those expressly created by
the Company), and (b) the Company or its designee, as the case may be, shall
deliver to Recipient or his or her legal representative, as the case may be, (1)
the purchase price for such shares, as determined in accordance with Section 7.1
or 7.2 hereof, as the case may be, in the form of a check, and (2) if
applicable, a share certificate for the number of shares, if any, represented by
the share certificate(s) transferred to the Company that are not First Refusal
Shares.

        7.5 EFFECT OF TENDER OF PURCHASE PRICE. Notwithstanding the failure of
the holder of any certificate evidencing all or any part of the Award Shares or
the First Refusal Shares, as the case may be, to deliver the same to the Company
for cancellation, and upon tender by the Company of the purchase price for any
of such shares in accordance with the terms of this Agreement, such shares and
the certificates representing same shall forthwith and without further action be
deemed to be canceled and forfeited.

        7.6 LEGENDS AND TERMINATION OF RIGHTS. All share certificates
representing the shares issued upon exercise of any Award shall bear a legend or
legends noting the existence of the restrictions imposed by this Plan.



                                       16
<PAGE>   17

                                  ARTICLE VIII
                                   DEFINITIONS

        Capitalized terms used in this Plan and not otherwise defined have the
meanings set forth below:

        "ACCOUNTANT VALUATION" shall have the meaning set forth in Section
7.1(c).

        "ADMINISTRATOR" means the Board as long as no Committee has been
appointed and is in effect and also means the Committee to the extent that the
Board has delegated authority thereto.

        "AFFILIATED ENTITY" means any Parent Corporation of the Company or
Subsidiary Corporation of the Company or any other entity controlling,
controlled by, or under common stock with the Company.

        "AWARD" means any Stock Option granted or sold to an Eligible Person
under this Plan, or any similar award granted by the Company prior to the
Effective Date and outstanding as of the Effective Date that is governed by this
Plan.

        "AWARD DOCUMENT" means the agreement or confirming memorandum setting
forth the terms and conditions of an Award.

        "AWARD SHARES" shall have the meaning set forth in Section 7.1(a).

        "BOARD" means the Board of Directors of the Company.

        "BOARD VALUATION" shall have the meaning set forth in Section 7.1(c).

        "CALIFORNIA COMMISSIONER" means the Commissioner of Corporations of the
State of California.

        "CALIFORNIA REGULATED PLAN" means this Plan at any time that Awards and
securities underlying Awards are California Regulated Securities and the Company
relies upon the exemption provided by Section 25102(o) of the California
Securities Law (or another exemption imposing comparable requirements) to exempt
the issuance of securities under this Plan from qualification under the
California Securities Law.

        "CALIFORNIA REGULATED SECURITIES" means Awards and securities underlying
Awards that are subject to the California Securities Law or the California
Securities Rules.

        "CALIFORNIA SECURITIES LAW" means the California Corporate Securities
Law of 1968, as amended.

        "CALIFORNIA SECURITIES RULES" means the Rules of the California
Commissioner adopted under the California Securities Law.


                                       17
<PAGE>   18


        "CLOSING" shall have the meaning set forth in Section 7.3.

        "COMMITTEE" means any committee appointed by the Board to administer
this Plan pursuant to Section 4.1.

        "COMMON STOCK" means the common stock of the Company, as constituted on
the Effective Date, and as thereafter adjusted under Section 3.4.

        "COMPANY" means Innosoft International, Inc., a California corporation.

        "DISPOSITION" shall have the meaning set forth in Section 7.2(a).

        "EFFECTIVE DATE" means February 12, 1999, which is the date this Plan
was adopted by the Board whether or not shareholder approval had yet been
obtained as of such date.

        "ELIGIBLE PERSON" includes directors, officers, employees, consultants
and advisors of the Company or of any Affiliated Entity.

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

        "EXCHANGE ACT REGISTERED COMPANY" means that the Company has any class
of any equity security registered pursuant to Section 12 of the Exchange Act.

        "EXPIRATION DATE" means February 11, 2009.

        "FAIR MARKET VALUE" of a share of the Company's capital stock as of a
particular date means (i) if the stock is listed on an established stock
exchange or exchanges (including for this purpose, the Nasdaq National Market),
the arithmetic mean of the highest and lowest sale prices of the stock for the
trading day immediately preceding such date on the primary exchange upon which
the stock trades, as measured by volume, as published in The Wall Street
Journal, or, if no sale price was quoted for such date, then as of the next
preceding date on which such a sale price was quoted; or (ii) if the stock is
not then listed on an exchange or the Nasdaq National Market, the average of the
closing bid and asked prices per share for the stock in the over-the-counter
market on such date (in the case of (i) or (ii), subject to adjustment as and if
necessary and appropriate to set an exercise price not less than 100% of the
fair market value of the stock on the date an Award is granted); or (iii) if the
stock is not then listed on an exchange or quoted in the over-the-counter
market, an amount determined in good faith by the Administrator; provided,
however, that (A) when appropriate, the Administrator in determining Fair Market
Value of capital stock of the Company shall consider such factors as may be
required by the California Securities Law and the California Securities Rules
while this Plan is a California Regulated Plan, and may take into account such
other factors as it may deem appropriate under the circumstances including the
absence of a public trading market for the Company's securities, and (B) if the
stock is traded on the Nasdaq SmallCap Market and both sales prices and bid and
asked prices are quoted or available, the Administrator may elect to determine
Fair Market Value under either clause (i) or (ii) above. Notwithstanding the
foregoing, the Fair Market Value of capital stock for

                                       18
<PAGE>   19

purposes of grants of Incentive Stock Options must be determined in compliance
with applicable provisions of the IRC. The Fair Market Value of rights or
property other than capital stock of the Company means the fair market value
thereof as determined by the Administrator on the basis of such factors as it
may deem appropriate.

        "FIRST REFUSAL OFFER" shall have the meaning set forth in Section
7.2(a).

        "FIRST REFUSAL OPTION" shall have the meaning set forth in Section
7.2(b).

        "FIRST REFUSAL SHARES" shall have the meaning set forth in Section
7.2(b).

        "INCENTIVE STOCK OPTION" means a Stock Option that qualifies as an
incentive stock option under Section 422 of the IRC.

        "INDEPENDENT ACCOUNTING FIRM" shall have the meaning set forth in
Section 7.1(c).

        "IRC" means the Internal Revenue Code of 1986, as amended.

        "JUST CAUSE DISMISSAL" means a termination of a Recipient's employment
for any of the following reasons: (a) the commission by the Recipient of any act
of embezzlement, fraud or dishonesty; (b) any deliberate disregard by the
Recipient of any policy promulgated by the Board or the Chief Executive Officer
of the Company, or any Affiliated Entity with which Recipient is employed, which
results in any loss, damage or injury to the Company or any Affiliated Entity;
(c) any unauthorized disclosure by the Recipient of any trade secret or
confidential information of the Company or any Affiliated Entity; (d) any
commission of an act by the Recipient which constitutes unfair competition with
the Company or any Affiliated Entity or induces any customer or vendor of the
Company or any Affiliated Entity to terminate any agreement with such
corporation; or (e) any breach by the Recipient of any agreement or covenant,
including, without limitation, in any employment agreement, consulting
agreement, purchase agreement, purchase order or confidentiality agreement, he
or she has made with the Company or any Affiliated Entity; provided, however,
that if a Recipient is party to an employment agreement with the Company or any
Affiliated Entity providing for just cause dismissal (or some comparable
concept) of Recipient from Recipient's employment with the Company or any
Affiliated Entity, "Just Cause Dismissal" for purposes of this Plan will have
the same meaning as ascribed thereto or to such comparable concept in such
employment agreement.

        "NONQUALIFIED STOCK OPTION" means a Stock Option that is not an
Incentive Stock Option.

        "PARENT CORPORATION" means any Parent Corporation as defined in Section
424(e) of the IRC.

        "PERMANENT DISABILITY" means that the Recipient becomes physically or
mentally incapacitated or disabled so that the Recipient is unable to perform
substantially the same services as the Recipient performed prior to incurring
such incapacity or disability (the Company, at its option and expense, being
entitled to retain a physician to confirm the

                                       19
<PAGE>   20

existence of such incapacity or disability, and the determination of such
physician to be binding upon the Company and the Recipient), and such incapacity
or disability continues for a period of three (3) consecutive months or six (6)
months in any 12-month period or such other period(s) as may be determined by
the Administrator with respect to any Award, provided that for purposes of
determining the period during which an Incentive Stock Option may be exercised
pursuant to Section 6.1(e), Permanent Disability shall mean "permanent and total
disability" as defined in Section 22(e) of the IRC.

        "PERMITTED TRANSFER" shall have the meaning set forth in Section 7.2(a).

        "PERSON" means any person, entity or group, within the meaning of
Section 13(d) or 14(d) of the Exchange Act, but excluding (i) the Company and
its subsidiaries, (ii) any employee stock ownership or other employee benefit
plan maintained by the Company and (iii) an underwriter or underwriting
syndicate that has acquired the Company's securities solely in connection with a
public offering thereof.

        "PLAN" means this 1999 Equity Incentive Plan of the Company.

        "PLAN TERM" means the period during which this Plan remains in effect
(commencing the Effective Date and ending on the Expiration Date).

        "RECIPIENT" means a person who has received an Award.

        "RECIPIENT VALUATION" shall have the meaning set forth in Section
7.1(c).

        "REORGANIZATION" means any merger, consolidation or other
reorganization.

        "REPURCHASE OPTION" shall have the meaning set forth in Section 7.1(a).

        "REPURCHASE PERIOD" means the period set forth in Section 7.1(a).

        "RETIREMENT" of a Recipient means the Recipient's resignation from the
Company or any Affiliated Entity after reaching age [60] and at least five years
of full-time employment by the Company or any Affiliated Entity without any
circumstances that would justify a Just Cause Dismissal of the Recipient.

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

        "SELLER" shall have the meaning set forth in Section 7.2(a).

        "SIGNIFICANT SHAREHOLDER" is an individual who, at the time a Stock
Option is granted to such individual under this Plan, owns more than ten percent
(10%) of the combined voting power of all classes of stock of the Company or of
any Parent Corporation or Subsidiary Corporation (after application of the
attribution rules set forth in Section 424(d) of the IRC).

        "STOCK OPTION" means a right to purchase stock of the Company granted
under Section 6.1 of this Plan.


                                       20
<PAGE>   21

        "SUBSIDIARY CORPORATION" means any Subsidiary Corporation as defined in
Section 424(f) of the IRC.

        "TRANSFEREE" shall have the meaning set forth in Section 7.2(a).


                                       21
<PAGE>   22

                                    EXHIBIT A
                                       TO
                          INNOSOFT INTERNATIONAL, INC.
                           1999 EQUITY INCENTIVE PLAN

Innosoft International, Inc.
1050 Lakes Drive
West Covina, CA  91790

RE:  NOTICE OF EXERCISE OF STOCK OPTION

Notice is hereby given that I elect to purchase the number of shares (the
"Shares") set forth below pursuant to the stock option referenced below at the
exercise price applicable thereto:

Option Grant Date:
                                                            ---------------

Total Number of Shares
Underlying Original Option:
                                                            ---------------

Number of Shares for
which Option has been
Previously Exercised:
                                                            ---------------

Exercise Price Per Share:
                                                            ---------------

Number of Shares Being
Acquired With This Exercise:
                                                            ---------------


A check in the amount of the aggregate price of the shares being purchased is
attached.

I hereby confirm that such shares are being acquired by me for my own account
for investment purposes, and not with a view to, or for resale in connection
with, any distribution thereof. I will not sell or dispose of my Shares in
violation of the Securities Act of 1933, as amended, or any applicable federal
or state securities laws. Further, I understand that the exemption from taxable
income at the time of exercise is dependent upon my holding such stock for a
period of at least one year from the date of exercise and two years from the
date of grant of the Option.


                                       22

<PAGE>   23

I understand that the certificate representing the Shares will bear a
restrictive legend within the contemplation of the Securities Act and as
required by such other state or federal law or regulation applicable to the
issuance or delivery of the Shares.

I agree to provide to the Company such additional documents or information as
may be required pursuant to the Company's 1999 Equity Incentive Plan.



--------------------------------
          (signature)


--------------------------------
       (name of Optionee)


                                       23