<PAGE>

                                                                   EXHIBIT 10.26

                                 PACKETEER, INC.
                            1999 STOCK INCENTIVE PLAN

             AMENDED AND RESTATED EFFECTIVE AS OF DECEMBER 15, 2004

                                   ARTICLE ONE

                               GENERAL PROVISIONS

      I.    PURPOSE OF THE PLAN

            This 1999 Stock Incentive Plan is intended to promote the interests
of Packeteer, Inc., a Delaware corporation, by providing eligible persons in the
Corporation's service with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in such service.

            Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.

      II.   STRUCTURE OF THE PLAN

            A. The Plan shall be divided into five separate equity programs:

                  - the Discretionary Option Grant Program under which eligible
      persons may, at the discretion of the Plan Administrator, be granted
      options to purchase shares of Common Stock,

                  - the Salary Investment Option Grant Program under which
      eligible employees may elect to have a portion of their base salary
      invested each year in special option grants,

                  - the Stock Issuance Program under which eligible persons may,
      at the discretion of the Plan Administrator, be issued shares of Common
      Stock directly, either through the immediate purchase of such shares or as
      a bonus for services rendered the Corporation (or any Parent or
      Subsidiary),

                  - the Automatic Option Grant Program under which eligible
      non-employee Board members shall automatically receive option grants at
      designated intervals over their period of continued Board service, and

<PAGE>

                  - the Director Fee Option Grant Program under which
      non-employee Board members may elect to have all or any portion of their
      annual retainer fee otherwise payable in cash applied to a special stock
      option grant.

            B. The provisions of Articles One and Seven shall apply to all
equity programs under the Plan and shall govern the interests of all persons
under the Plan.

      III.  ADMINISTRATION OF THE PLAN

            A. The Primary Committee shall have sole and exclusive authority to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders. Administration of the Discretionary Option Grant
and Stock Issuance Programs with respect to all other persons eligible to
participate in those programs may, at the Board's discretion, be vested in the
Primary Committee or a Secondary Committee, or the Board may retain the power to
administer those programs with respect to all such persons. However, any
discretionary option grants or stock issuances for members of the Primary
Committee shall be made by a disinterested majority of the Board.

In addition to the foregoing, the Board may, in its discretion by resolution
adopted by the Board, authorize one or more officers of the Corporation to grant
one or more options or stock appreciation rights under the Discretionary Option
Grant Program, without further approval of the Board or the Primary or Secondary
Committee, to any Employee, other than a person who, at the time of such grant,
is a Section 16 Insider, and to determine the number and vesting terms of shares
of Common Stock to be subject to such options and stock appreciation rights;
provided, however, that (1) no such options or stock appreciation rights shall
be granted to any Employee in any calendar year for more than 50,000 shares of
Common Stock, (2) the number of shares of Common Stock subject to each such
option and stock appreciation right shall comply with guidelines established
from time to time by the Board or the Primary Committee, and (3) each such
option and stock appreciation right shall be subject to the terms and conditions
of the appropriate standard form of agreement approved by the Board or the
Primary Committee and shall conform to the provisions of the Plan and such other
guidelines as shall be established from time to time by the Board or the Primary
Committee. Any officer or officers so authorized by the Board shall be deemed
the Plan Administrator solely for the purpose of granting such options and stock
appreciation rights.

            B. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions of
any Secondary Committee and reassume all powers and authority previously
delegated to such committee.

            C. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of those programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final

                                       2.
<PAGE>

and binding on all parties who have an interest in the Discretionary Option
Grant and Stock Issuance Programs under its jurisdiction or any option or stock
issuance thereunder.

            D. The Primary Committee shall have the sole and exclusive authority
to determine which Section 16 Insiders and other highly compensated Employees
shall be eligible for participation in the Salary Investment Option Grant
Program for one or more calendar years. However, all option grants under the
Salary Investment Option Grant Program shall be made in accordance with the
express terms of that program, and the Primary Committee shall not exercise any
discretionary functions with respect to the option grants made under that
program.

            E. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.

            F. Administration of the Automatic Option Grant and Director Fee
Option Grant Programs shall be self-executing in accordance with the terms of
those programs, and no Plan Administrator shall exercise any discretionary
functions with respect to any option grants or stock issuances made under those
programs.

      IV.   ELIGIBILITY

            A. The persons eligible to participate in the Discretionary Option
Grant and Stock Issuance Programs are as follows:

                  (i) Employees,

                  (ii) non-employee members of the Board or the board of
      directors of any Parent or Subsidiary, and

                  (iii) consultants and other independent advisors who provide
      services to the Corporation (or any Parent or Subsidiary).

            B. Only Employees who are Section 16 Insiders or other highly
compensated individuals shall be eligible to participate in the Salary
Investment Option Grant Program.

            C. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive such grants, the time or times
when those grants are to be made, the number of shares to be covered by each
such grant, the status of the granted option as either an Incentive Option or a
Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive such issuances, the time or times when the issuances are
to be

                                       3.
<PAGE>

made, the number of shares to be issued to each Participant, the vesting
schedule (if any) applicable to the issued shares and the consideration for such
shares.

            D. The Plan Administrator shall have the absolute discretion either
to grant options in accordance with the Discretionary Option Grant Program or to
effect stock issuances in accordance with the Stock Issuance Program.

            E. The individuals who shall be eligible to participate in the
Automatic Option Grant Program shall be limited to (i) those individuals who
first become non-employee Board members on or after the Underwriting Date,
whether through appointment by the Board or election by the Corporation's
stockholders, and (ii) those individuals who continue to serve as non-employee
Board members at one or more Annual Stockholders Meetings held after the
Underwriting Date. A non-employee Board member who has previously been in the
employ of the Corporation (or any Parent or Subsidiary) shall NOT be eligible to
receive the initial automatic option grant under the Automatic Option Grant
Program at the time he or she first becomes a non-employee Board member, but
shall be eligible to receive one or more annual automatic option grants under
the Automatic Option Grant Program while he or she continues to serve as a
non-employee Board member.

            F. All non-employee Board members shall be eligible to participate
in the Director Fee Option Grant Program.

      V.    STOCK SUBJECT TO THE PLAN

            A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The number of shares of Common Stock reserved
for issuance over the term of the Plan shall not exceed the sum of (i) 8,156,779
shares plus (ii) the additional shares of Common Stock automatically added to
the share reserve each year pursuant to the provisions of Section V.B. of this
Article One. As of January 2, 2002, the 8,156,779-share reserve consisted of (i)
the 2,945,917 shares which remained available for issuance, as of the Plan
Effective Date, under the Predecessor Plan as last approved by the Corporation's
stockholders, including the shares subject to outstanding options under that
Predecessor Plan, (ii) an additional increase of 900,000 shares of Common Stock
approved by the Corporation's stockholders prior to the Underwriting Date, (iii)
the January 3, 2000 automatic increase of 1,340,000 shares of Common Stock, (iv)
the January 2, 2001 automatic increase of 1,473,311 shares of Common Stock, and
(v) the January 2, 2002 automatic increase of 1,497,551 shares of Common Stock,
(vi) the January 2, 2003 automatic increase of 1,529,941 shares of Common Stock,
(vii) the January 2, 2004 automatic increase of 1,625,059 shares of Common
Stock.

            B. The number of shares of Common Stock available for issuance under
the Plan shall automatically increase on the first trading day of January each
calendar year during the term of the Plan, beginning with calendar year 2000, by
an amount equal to five percent (5 %) of the total number of shares of Common
Stock outstanding on the last trading day in December of the immediately
preceding calendar year, but in no event shall any such annual increase exceed
3,000,000 shares.

                                       4.
<PAGE>

            C. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 750,000 shares of Common Stock in the aggregate per calendar year.

            D. Shares of Common Stock subject to outstanding options (including
options incorporated into this Plan from the Predecessor Plan) shall be
available for subsequent issuance under the Plan to the extent (i) those options
expire or terminate for any reason prior to exercise in full or (ii) the options
are cancelled in accordance with the cancellation-regrant provisions of Article
Two. Unvested shares issued under the Plan and subsequently cancelled or
repurchased by the Corporation at the original issue price paid per share,
pursuant to the Corporation's repurchase rights under the Plan shall be added
back to the number of shares of Common Stock reserved for issuance under the
Plan and shall accordingly be available for reissuance through one or more
subsequent option grants or direct stock issuances under the Plan. However,
should the exercise price of an option under the Plan be paid with shares of
Common Stock or should shares of Common Stock otherwise issuable under the Plan
be withheld by the Corporation in satisfaction of the withholding taxes incurred
in connection with the exercise of an option or the vesting of a stock issuance
under the Plan, then the number of shares of Common Stock available for issuance
under the Plan shall be reduced by the gross number of shares for which the
option is exercised or which vest under the stock issuance, and not by the net
number of shares of Common Stock issued to the holder of such option or stock
issuance. Shares of Common Stock underlying one or more stock appreciation
rights exercised under Section V of Article Two, Section III of Article Three,
Section II of Article Five or Section III of Article Six of the Plan shall NOT
be available for subsequent issuance under the Plan.

            E. If any change is made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made by the Plan Administrator to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the maximum number and/or class of
securities for which any one person may be granted stock options, separately
exercisable stock appreciation rights and direct stock issuances under the Plan
per calendar year, (iii) the number and/or class of securities for which grants
are subsequently to be made under the Automatic Option Grant Program to new and
continuing non-employee Board members, (iv) the number and/or class of
securities and the exercise price per share in effect under each outstanding
option under the Plan, (v) the number and/or class of securities and price per
share in effect under each outstanding option incorporated into this Plan from
the Predecessor Plan and (vi) the maximum number and/or class of securities by
which the share reserve is to increase automatically each calendar year pursuant
to the provisions of Section V.B. of this Article One. Such adjustments to the
outstanding options are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.

                                       5.
<PAGE>

                                   ARTICLE TWO

                       DISCRETIONARY OPTION GRANT PROGRAM

      I.    OPTION TERMS

            Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.

            A.    EXERCISE PRICE.

                  1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the option grant date.

                  2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Seven and the documents evidencing the option, be payable in one or more
of the forms specified below:

                        (i) cash or check made payable to the Corporation,

                        (ii) shares of Common Stock held for the requisite
      period necessary to avoid a charge to the Corporation's earnings for
      financial reporting purposes and valued at Fair Market Value on the
      Exercise Date, or

                        (iii) to the extent the option is exercised for vested
      shares, through a special sale and remittance procedure pursuant to which
      the Optionee shall concurrently provide irrevocable instructions to (a) a
      Corporation-designated brokerage firm to effect the immediate sale of the
      purchased shares and remit to the Corporation, out of the sale proceeds
      available on the settlement date, sufficient funds to cover the aggregate
      exercise price payable for the purchased shares plus all applicable
      Federal, state and local income and employment taxes required to be
      withheld by the Corporation by reason of such exercise and (b) the
      Corporation to deliver the certificates for the purchased shares directly
      to such brokerage firm in order to complete the sale.

            Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.

            B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at
such time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.

                                       6.
<PAGE>

            C.    EFFECT OF TERMINATION OF SERVICE.

                  1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:

                        (i) Any option outstanding at the time of the Optionee's
      cessation of Service for any reason shall remain exercisable for such
      period of time thereafter as shall be determined by the Plan Administrator
      and set forth in the documents evidencing the option, but no such option
      shall be exercisable after the expiration of the option term.

                        (ii) Any option held by the Optionee at the time of
      death and exercisable in whole or in part at that time may be subsequently
      exercised by the personal representative of the Optionee's estate or by
      the person or persons to whom the option is transferred pursuant to the
      Optionee's will or in accordance with the laws of descent and distribution
      or by the Optionee's designated beneficiary or beneficiaries of that
      option.

                        (iii) Should the Optionee's Service be terminated for
      Misconduct, then all outstanding options held by the Optionee shall
      terminate immediately and cease to be outstanding.

                        (iv) During the applicable post-Service exercise period,
      the option may not be exercised in the aggregate for more than the number
      of vested shares for which the option is exercisable on the date of the
      Optionee's cessation of Service. Upon the expiration of the applicable
      exercise period or (if earlier) upon the expiration of the option term,
      the option shall terminate and cease to be outstanding for any vested
      shares for which the option has not been exercised. However, the option
      shall, immediately upon the Optionee's cessation of Service, terminate and
      cease to be outstanding to the extent the option is not otherwise at that
      time exercisable for vested shares.

                  2. The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:

                        (i) extend the period of time for which the option is to
      remain exercisable following the Optionee's cessation of Service from the
      limited exercise period otherwise in effect for that option to such
      greater period of time as the Plan Administrator shall deem appropriate,
      but in no event beyond the expiration of the option term, and/or

                        (ii) permit the option to be exercised, during the
      applicable post-Service exercise period, not only with respect to the
      number of vested shares of Common Stock for which such option is
      exercisable at the time of the Optionee's cessation of Service but also
      with respect to one or more additional installments in which the Optionee
      would have vested had the Optionee continued in Service.

                                       7.
<PAGE>

            D. STOCKHOLDER RIGHTS. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.

            E. REPURCHASE RIGHTS. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.

            F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. However, a Non-Statutory Option
may, in connection with the Optionee's estate plan, be assigned in whole or in
part during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate. Notwithstanding the foregoing, the Optionee may also designate
one or more persons as the beneficiary or beneficiaries of his or her
outstanding options under this Article Two, and those options shall, in
accordance with such designation, automatically be transferred to such
beneficiary or beneficiaries upon the Optionee's death while holding those
options. Such beneficiary or beneficiaries shall take the transferred options
subject to all the terms and conditions of the applicable agreement evidencing
each such transferred option, including (without limitation) the limited time
period during which the option may be exercised following the Optionee's death.

      II.   INCENTIVE OPTIONS

            The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Seven shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options when
issued under the Plan shall not be subject to the terms of this Section II.

            A. ELIGIBILITY. Incentive Options may only be granted to Employees.

            B. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares
of Common Stock (determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the Plan (or any other
option plan of the Corporation or any Parent or Subsidiary) may for the first
time become exercisable as Incentive Options during any one calendar year shall
not exceed the sum of One Hundred Thousand Dollars ($100,000).

                                       8.
<PAGE>

To the extent the Employee holds two (2) or more such options which become
exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.

            C. 10% STOCKHOLDER. If any Employee to whom an Incentive Option is
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.

      III. CORPORATE TRANSACTION/CHANGE IN CONTROL

            A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for the total number of shares of Common Stock at the time
subject to such option and may be exercised for any or all of those shares as
fully vested shares of Common Stock. However, an outstanding option shall NOT
become exercisable on such an accelerated basis if and to the extent: (i) such
option is, in connection with the Corporate Transaction, to be assumed by the
successor corporation (or parent thereof) or (ii) such option is to be replaced
with a cash incentive program of the successor corporation which preserves the
spread existing at the time of the Corporate Transaction on any shares for which
the option is not otherwise at that time exercisable and provides for subsequent
payout in accordance with the same exercise/vesting schedule applicable to those
option shares or (iii) the acceleration of such option is subject to other
limitations imposed by the Plan Administrator at the time of the option grant.

            B. All outstanding repurchase rights shall automatically terminate,
and the shares of Common Stock subject to those terminated rights shall
immediately vest in full, in the event of any Corporate Transaction, except to
the extent: (i) those repurchase rights are to be assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed by the
Plan Administrator at the time the repurchase right is issued.

            C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).

            D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issued to the Optionee had the option been exercised immediately prior to
such Corporate Transaction. If the holders of Common Stock receive cash
consideration in connection with the Corporate Transaction, the assumed option
may be adjusted, at the option of the successor corporation, to apply to the
number of shares of its common stock with a fair market value equivalent to the
cash consideration paid per share of Common Stock in such Corporate Transaction.
Appropriate adjustments to reflect such Corporate Transaction shall also be made
to (i) the exercise price payable per share under each outstanding option,
provided the aggregate exercise price payable for such securities shall remain
the same, (ii) the maximum number and/or class of securities available for
issuance over the

                                       9.
<PAGE>

remaining term of the Plan and (iii) the maximum number and/or class of
securities for which any one person may be granted stock options, separately
exercisable stock appreciation rights and direct stock issuances under the Plan
per calendar year and (iv) the maximum number and/or class of securities by
which the share reserve is to increase automatically each calendar year.

            E. The Plan Administrator shall have the discretionary authority to
structure one or more outstanding options under the Discretionary Option Grant
Program so that those options shall, immediately prior to the effective date of
such Corporate Transaction, become fully exercisable for the total number of
shares of Common Stock at the time subject to those options and may be exercised
for any or all of those shares as fully vested shares of Common Stock, whether
or not those options are to be assumed in the Corporate Transaction. In
addition, the Plan Administrator shall have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the
Discretionary Option Grant Program so that those rights shall not be assignable
in connection with such Corporate Transaction and shall accordingly terminate
upon the consummation of such Corporate Transaction, and the shares subject to
those terminated rights shall thereupon vest in full.

            F. The Plan Administrator shall have full power and authority to
structure one or more outstanding options under the Discretionary Option Grant
Program so that those options shall become fully exercisable for the total
number of shares of Common Stock at the time subject to those options in the
event the Optionee's Service is subsequently terminated by reason of an
Involuntary Termination within a designated period (not to exceed eighteen (18)
months) following the effective date of any Corporate Transaction in which those
options are assumed and do not otherwise accelerate. Any options so accelerated
shall remain exercisable for fully vested shares until the earlier of (i) the
expiration of the option term or (ii) the expiration of the one (1) year period
measured from the effective date of the Involuntary Termination. In addition,
the Plan Administrator may structure one or more of the Corporation's repurchase
rights so that those rights shall immediately terminate with respect to any
shares held by the Optionee at the time of his or her Involuntary Termination,
and the shares subject to those terminated repurchase rights shall accordingly
vest in full at that time.

            G. The Plan Administrator shall have the discretionary authority to
structure one or more outstanding options under the Discretionary Option Grant
Program so that those options shall, immediately prior to the effective date of
a Change in Control, become fully exercisable for the total number of shares of
Common Stock at the time subject to those options and may be exercised for any
or all of those shares as fully vested shares of Common Stock. In addition, the
Plan Administrator shall have the discretionary authority to structure one or
more of the Corporation's repurchase rights under the Discretionary Option Grant
Program so that those rights shall terminate automatically upon the consummation
of such Change in Control, and the shares subject to those terminated rights
shall thereupon vest in full. Alternatively, the Plan Administrator may
condition the automatic acceleration of one or more outstanding options under
the Discretionary Option Grant Program and the termination of one or more of the
Corporation's outstanding repurchase rights under such program upon the
subsequent termination of the Optionee's Service by reason of an Involuntary
Termination within a designated period (not to exceed eighteen (18) months)
following the effective date of such Change in Control. Each option so
accelerated shall remain exercisable for fully vested shares

                                       10.
<PAGE>

until the earlier of (i) the expiration of the option term or (ii) the
expiration of the one (1) year period measured from the effective date of
Optionee's cessation of Service.

            H. The portion of any Incentive Option accelerated in connection
with a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
($100,000) limitation is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be exercisable as a
Nonstatutory Option under the Federal tax laws.

            I. The outstanding options shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.

      IV. CANCELLATION AND REGRANT OF OPTIONS

            The Plan Administrator shall have the authority to effect, at any
time and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program (including outstanding options incorporated from the Predecessor
Plan) and to grant in substitution new options covering the same or different
number of shares of Common Stock but with an exercise price per share based on
the Fair Market Value per share of Common Stock on the new grant date.

      V. STOCK APPRECIATION RIGHTS

            A. The Plan Administrator shall have full power and authority to
grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.

            B. The following terms shall govern the grant and exercise of tandem
stock appreciation rights:

                        (i) One or more Optionees may be granted the right,
      exercisable upon such terms as the Plan Administrator may establish, to
      elect between the exercise of the underlying option for shares of Common
      Stock and the surrender of that option in exchange for a distribution from
      the Corporation in an amount equal to the excess of (a) the Fair Market
      Value (on the option surrender date) of the number of shares in which the
      Optionee is at the time vested under the surrendered option (or
      surrendered portion thereof) over (b) the aggregate exercise price payable
      for such shares.

                                       11.
<PAGE>

                        (ii) No such option surrender shall be effective unless
      it is approved by the Plan Administrator, either at the time of the actual
      option surrender or at any earlier time. If the surrender is so approved,
      then the distribution to which the Optionee shall be entitled may be made
      in shares of Common Stock valued at Fair Market Value on the option
      surrender date, in cash, or partly in shares and partly in cash, as the
      Plan Administrator shall in its sole discretion deem appropriate.

                        (iii) If the surrender of an option is not approved by
      the Plan Administrator, then the Optionee shall retain whatever rights the
      Optionee had under the surrendered option (or surrendered portion thereof)
      on the option surrender date and may exercise such rights at any time
      prior to the later of (a) five (5) business days after the receipt of the
      rejection notice or (b) the last day on which the option is otherwise
      exercisable in accordance with the terms of the documents evidencing such
      option, but in no event may such rights be exercised more than ten (10)
      years after the option grant date.

            C. The following terms shall govern the grant and exercise of
limited stock appreciation rights:

                        (i) One or more Section 16 Insiders may be granted
      limited stock appreciation rights with respect to their outstanding
      options.

                        (ii) Upon the occurrence of a Hostile Take-Over, each
      individual holding one or more options with such a limited stock
      appreciation right shall have the unconditional right (exercisable for a
      thirty (30)-day period following such Hostile Take-Over) to surrender each
      such option to the Corporation. In return for the surrendered option, the
      Optionee shall receive a cash distribution from the Corporation in an
      amount equal to the excess of (A) the Take-Over Price of the shares of
      Common Stock at the time subject to such option (whether or not the
      Optionee is otherwise vested in those shares) over (B) the aggregate
      exercise price payable for those shares. Such cash distribution shall be
      paid within five (5) days following the option surrender date.

                        (iii) At the time such limited stock appreciation right
      is granted, the Plan Administrator shall pre-approve any subsequent
      exercise of that right in accordance with the terms of this Paragraph C.
      Accordingly, no further approval of the Plan Administrator or the Board
      shall be required at the time of the actual option surrender and cash
      distribution.

                                       12.
<PAGE>

                                 ARTICLE THREE

                     SALARY INVESTMENT OPTION GRANT PROGRAM

      I.    OPTION GRANTS

            The Primary Committee shall have the sole and exclusive authority to
determine the calendar year or years (if any) for which the Salary Investment
Option Grant Program is to be in effect and to select the Section 16 Insiders
and other highly compensated Employees eligible to participate in the Salary
Investment Option Grant Program for such calendar year or years. Each selected
individual who elects to participate in the Salary Investment Option Grant
Program must, prior to the start of each calendar year of participation, file
with the Plan Administrator (or its designate) an irrevocable authorization
directing the Corporation to reduce his or her base salary for that calendar
year by an amount not less than Ten Thousand Dollars ($10,000.00) nor more than
Fifty Thousand Dollars ($50,000.00). Each individual who files such a timely
authorization shall automatically be granted an option under the Salary
Investment Option Grant Program on the first trading day in January of the
calendar year for which the salary reduction is to be in effect.

      II.   OPTION TERMS

            Each option shall be a Non-Statutory Option evidenced by one or more
documents in the form approved by the Plan Administrator; provided, however,
that each such document shall comply with the terms specified below.

            A.    EXERCISE PRICE.

                  1. The exercise price per share shall be thirty-three and
one-third percent (33-1/3%) of the Fair Market Value per share of Common Stock
on the option grant date.

                  2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.

            B.    NUMBER OF OPTION SHARES. The number of shares of Common Stock
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):

                  X = A / (B x 66-2/3%), where

                  X is the number of option shares,

                  A is the dollar amount of the reduction in the Optionee's base
            salary for the calendar year to be in effect pursuant to this
            program, and

                                       13.
<PAGE>

                  B is the Fair Market Value per share of Common Stock on the
            option grant date.

            C. EXERCISE AND TERM OF OPTIONS. The option shall become exercisable
in a series of twelve (12) successive equal monthly installments upon the
Optionee's completion of each calendar month of Service in the calendar year for
which the salary reduction is in effect. Each option shall have a maximum term
of ten (10) years measured from the option grant date.

            D. EFFECT OF TERMINATION OF SERVICE. Should the Optionee cease
Service for any reason while holding one or more options under this Article
Three, then each such option shall remain exercisable, for any or all of the
shares for which the option is exercisable at the time of such cessation of
Service, until the earlier of (i) the expiration of the ten (10)-year option
term or (ii) the expiration of the three (3)-year period measured from the date
of such cessation of Service. Should the Optionee die while holding one or more
options under this Article Three, then each such option may be exercised, for
any or all of the shares for which the option is exercisable at the time of the
Optionee's cessation of Service (less any shares subsequently purchased by
Optionee prior to death), by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred pursuant to
the Optionee's will or in accordance with the laws of descent and distribution
or by the designated beneficiary or beneficiaries of such option. Such right of
exercise shall lapse, and the option shall terminate, upon the earlier of (i)
the expiration of the ten (10)-year option term or (ii) the three (3)-year
period measured from the date of the Optionee's cessation of Service. However,
the option shall, immediately upon the Optionee's cessation of Service for any
reason, terminate and cease to remain outstanding with respect to any and all
shares of Common Stock for which the option is not otherwise at that time
exercisable.

      III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

            A. In the event of any Corporate Transaction while the Optionee
remains in Service, each outstanding option held by such Optionee under this
Salary Investment Option Grant Program shall automatically accelerate so that
each such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable for the total number of shares of Common
Stock at the time subject to such option and may be exercised for any or all of
those shares as fully-vested shares of Common Stock. Each such outstanding
option shall terminate immediately following the Corporate Transaction, except
to the extent assumed by the successor corporation (or parent thereof) in such
Corporate Transaction. Any option so assumed and shall remain exercisable for
the fully-vested shares until the earliest of (i) the expiration of the ten
(10)-year option term, (ii) the expiration of the three (3)-year period measured
from the date of the Optionee's cessation of Service or (iii) the surrender of
the option in connection with a Hostile Take-Over.

            B. In the event of a Change in Control while the Optionee remains in
Service, each outstanding option held by such Optionee under this Salary
Investment Option Grant Program shall automatically accelerate so that each such
option shall immediately become fully exercisable for the total number of shares
of Common Stock at the time subject to such option and may be exercised for any
or all of those shares as fully-vested shares of Common Stock.

                                      14.
<PAGE>

The option shall remain so exercisable until the earliest to occur of (i) the
expiration of the ten (10)-year option term, (ii) the expiration of the three
(3)-year period measured from the date of the Optionee's cessation of Service,
(iii) the termination of the option in connection with a Corporate Transaction
or (iv) the surrender of the option in connection with a Hostile Take-Over.

            C. Upon the occurrence of a Hostile Take-Over while the Optionee
remains in Service, the Optionee shall have a thirty (30)-day period in which to
surrender to the Corporation each outstanding option granted him or her under
the Salary Investment Option Grant Program. The Optionee shall in return be
entitled to a cash distribution from the Corporation in an amount equal to the
excess of (i) the Take-Over Price of the shares of Common Stock at the time
subject to the surrendered option (whether or not the Optionee is otherwise at
the time vested in those shares) over (ii) the aggregate exercise price payable
for such shares. Such cash distribution shall be paid within five (5) days
following the surrender of the option to the Corporation. The Primary Committee
shall, at the time the option with such limited stock appreciation right is
granted under the Salary Investment Option Grant Program, pre-approve any
subsequent exercise of that right in accordance with the terms of this Paragraph
C. Accordingly, no further approval of the Primary Committee or the Board shall
be required at the time of the actual option surrender and cash distribution.

            D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction. If
the holders of Common Stock receive cash consideration in connection with the
Corporate Transaction, the assumed option may be adjusted, at the option of the
successor corporation, to apply to the number of shares of its common stock with
a fair market value equivalent to the cash consideration paid per share of
Common Stock in such Corporate Transaction. Appropriate adjustments shall also
be made to the exercise price payable per share under each outstanding option,
provided the aggregate exercise price payable for such securities shall remain
the same.

            E. The grant of options under the Salary Investment Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.

      IV. REMAINING TERMS

            The remaining terms of each option granted under the Salary
Investment Option Grant Program shall be the same as the terms in effect for
option grants made under the Discretionary Option Grant Program.

                                      15.
<PAGE>

                                  ARTICLE FOUR

                             STOCK ISSUANCE PROGRAM

      I.    STOCK ISSUANCE TERMS

            Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate issuances without any intervening option
grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement which complies with the terms specified below. Shares of Common Stock
may also be issued under the Stock Issuance Program pursuant to share right
awards which entitle the recipients to receive those shares upon the attainment
of designated performance goals.

            A.    PURCHASE PRICE.

                  1. The purchase price per share shall be fixed by the Plan
Administrator, but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the issuance date.

                  2. Subject to the provisions of Section I of Article Seven,
shares of Common Stock may be issued under the Stock Issuance Program for any of
the following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:

                        (i) cash or check made payable to the Corporation, or

                        (ii) past services rendered to the Corporation (or any
      Parent or Subsidiary).

            B.    VESTING PROVISIONS.

                  1. Shares of Common Stock issued under the Stock Issuance
Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program shall be
determined by the Plan Administrator and incorporated into the Stock Issuance
Agreement. Shares of Common Stock may also be issued under the Stock Issuance
Program pursuant to share right awards which entitle the recipients to receive
those shares upon the attainment of designated performance goals.

                  2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or

                                      16.
<PAGE>

other change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration shall be issued subject to (i) the same
vesting requirements applicable to the Participant's unvested shares of Common
Stock and (ii) such escrow arrangements as the Plan Administrator shall deem
appropriate.

                  3. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those shares is
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares.

                  4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to the surrendered shares.

                  5. The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock which
would otherwise occur upon the cessation of the Participant's Service or the
non-attainment of the performance objectives applicable to those shares. Such
waiver shall result in the immediate vesting of the Participant's interest in
the shares of Common Stock as to which the waiver applies. Such waiver may be
effected at any time, whether before or after the Participant's cessation of
Service or the attainment or non-attainment of the applicable performance
objectives.

                  6. Outstanding share right awards under the Stock Issuance
Program shall automatically terminate, and no shares of Common Stock shall
actually be issued in satisfaction of those awards, if the performance goals
established for such awards are not attained. The Plan Administrator, however,
shall have the discretionary authority to issue shares of Common Stock under one
or more outstanding share right awards as to which the designated performance
goals have not been attained.

      II.   CORPORATE TRANSACTION/CHANGE IN CONTROL

            A. All of the Corporation's outstanding repurchase rights under the
Stock Issuance Program shall terminate automatically, and all the shares of
Common Stock subject to those terminated rights shall immediately vest in full,
in the event of any Corporate Transaction, except to the extent (i) those
repurchase rights are to be assigned to the successor corporation (or parent
thereof) in connection with such Corporate Transaction or (ii) such accelerated
vesting is precluded by other limitations imposed in the Stock Issuance
Agreement.

                                      17.
<PAGE>

            B. The Plan Administrator shall have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the Stock
Issuance Program so that those rights shall automatically terminate in whole or
in part, and the shares of Common Stock subject to those terminated rights shall
immediately vest, in the event the Participant's Service should subsequently
terminate by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any
Corporate Transaction in which those repurchase rights are assigned to the
successor corporation (or parent thereof).

            C. The Plan Administrator shall also have the discretionary
authority to structure one or more of the Corporation's repurchase rights under
the Stock Issuance Program so that those rights shall automatically terminate in
whole or in part, and the shares of Common Stock subject to those terminated
rights shall immediately vest, in the event the Participant's Service should
subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Change in Control.

      III.  SHARE ESCROW/LEGENDS

            Unvested shares may, in the Plan Administrator's discretion, be held
in escrow by the Corporation until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends on
the certificates evidencing those unvested shares.

                                      18.
<PAGE>

                                  ARTICLE FIVE

                         AUTOMATIC OPTION GRANT PROGRAM

            The provisions of the Automatic Option Grant Program have been
revised as of February 8, 2002, subject to approval by the Corporation's
stockholders at the 2002 Annual Stockholders Meeting.

      I.    OPTION TERMS

            A.    GRANT DATES. Option grants shall be made on the dates
specified below:

                  1. Each individual who is first elected or appointed as a
non-employee Board member at any time on or after the 2002 Annual Stockholders
Meeting shall automatically be granted, on the date of such initial election or
appointment, a Non-Statutory Option to purchase 30,000 shares of Common Stock,
provided that individual has not previously been in the employ of the
Corporation or any Parent or Subsidiary.

                  2. On the date of each Annual Stockholders Meeting, beginning
with the 2002 Annual Stockholders Meeting, each individual who is to continue to
serve as a non-employee Board member, whether or not that individual is standing
for re-election to the Board at that particular Annual Stockholders Meeting,
shall automatically be granted a Non-Statutory Option to purchase 15,000 shares
of Common Stock. There shall be no limit on the number of such annual automatic
option grants any one non-employee Board member may receive over his or her
period of Board service, and a non-employee Board member who has previously been
in the employ of the Corporation (or any Parent or Subsidiary) or who has
otherwise received one or more stock option grants from the Corporation shall be
eligible to receive one or more such annual automatic option grants over his or
her period of continued Board service.

                  3. Stockholder approval of the amendment contained in this
2002 Restatement at the 2002 Annual Stockholders Meeting shall constitute
pre-approval of each option granted on or after that Annual Stockholders Meeting
pursuant to the express terms of this Automatic Option Grant Program on the
basis of the amendments to this program effected by such Restatement and the
subsequent exercise of that option in accordance with its terms.

            B.    EXERCISE PRICE.

                  1. The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the option
grant date.

                  2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.

            C. OPTION TERM. Each option shall have a term of ten (10) years
measured from the option grant date.

                                      19.
<PAGE>

            D. EXERCISE AND VESTING OF OPTIONS. Each option shall be immediately
exercisable for any or all of the option shares. However, any shares purchased
under the option shall be subject to repurchase by the Corporation, at the
exercise price paid per share, upon the Optionee's cessation of Board service
prior to vesting in those shares. The shares subject to each initial automatic
option grant shall vest, and the Corporation's repurchase right shall lapse, in
a series of six (6) successive equal semi-annual installments upon the
Optionee's completion of each six (6)-month period of service as a Board member
over the thirty-six (36)-month period measured from the option grant date. The
shares subject to each annual automatic option grant shall vest, and the
Corporation's repurchase right shall lapse, in a series of two (2) successive
equal annual installments upon the Optionee's completion of each twelve
(12)-month period of service as a Board member over the twenty-four (24)-month
period measured from the option grant date.

            E. LIMITED TRANSFERABILITY OF OPTIONS. Each option under this
Article Five may, in connection with the Optionee's estate plan, be assigned in
whole or in part during the Optionee's lifetime to one or more members of the
Optionee's immediate family or to a trust established exclusively for one or
more such family members. The assigned portion may only be exercised by the
person or persons who acquire a proprietary interest in the option pursuant to
the assignment. The terms applicable to the assigned portion shall be the same
as those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate. The Optionee may also designate one or more persons as the
beneficiary or beneficiaries of his or her outstanding options under this
Article Five, and those options shall, in accordance with such designation,
automatically be transferred to such beneficiary or beneficiaries upon the
Optionee's death while holding those options. Such beneficiary or beneficiaries
shall take the transferred options subject to all the terms and conditions of
the applicable agreement evidencing each such transferred option, including
(without limitation) the limited time period during which the option may be
exercised following the Optionee's death.

            F. TERMINATION OF BOARD SERVICE. The following provisions shall
govern the exercise of any options held by the Optionee at the time the Optionee
ceases to serve as a Board member:

                        (i) The Optionee (or, in the event of Optionee's death,
      the personal representative of the Optionee's estate or the person or
      persons to whom the option is transferred pursuant to the Optionee's will
      or in accordance with the laws of descent and distribution or by the
      designated beneficiary or beneficiaries of such option) shall have a
      twelve (12)-month period following the date of such cessation of Board
      service in which to exercise each such option.

                        (ii) During the twelve (12)-month exercise period, the
      option may not be exercised in the aggregate for more than the number of
      vested shares of Common Stock for which the option is exercisable at the
      time of the Optionee's cessation of Board service.

                        (iii) Should the Optionee cease to serve as a Board
      member by reason of death or Permanent Disability, then all shares at the
      time

                                      20.
<PAGE>

      subject to the option shall immediately vest so that such option may,
      during the twelve (12)-month exercise period following such cessation of
      Board service, be exercised for all or any portion of those shares as
      fully-vested shares of Common Stock.

                        (iv) In no event shall the option remain exercisable
      after the expiration of the option term. Upon the expiration of the twelve
      (12)-month exercise period or (if earlier) upon the expiration of the
      option term, the option shall terminate and cease to be outstanding for
      any vested shares for which the option has not been exercised. However,
      the option shall, immediately upon the Optionee's cessation of Board
      service for any reason other than death or Permanent Disability, terminate
      and cease to be outstanding to the extent the option is not otherwise at
      that time exercisable for vested shares.

      II.   CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

            A. In the event of any Corporate Transaction while the Optionee
remains in Service, the shares of Common Stock at the time subject to each
outstanding option held by such Optionee under this Automatic Option Grant
Program but not otherwise vested shall automatically vest in full so that each
such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable for all of the shares of Common Stock at
the time subject to such option and may be exercised for all or any portion of
those shares as fully-vested shares of Common Stock. Immediately following the
consummation of the Corporate Transaction, each automatic option grant shall
terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof).

            B. In connection with any Change in Control while the Optionee
remains in Service, the shares of Common Stock at the time subject to each
outstanding option held by such Optionee under this Automatic Option Grant
Program but not otherwise vested shall automatically vest in full so that each
such option shall, immediately prior to the effective date of the Change in
Control, become fully exercisable for all of the shares of Common Stock at the
time subject to such option and may be exercised for all or any portion of those
shares as fully-vested shares of Common Stock. Each such option shall remain
exercisable for such fully-vested option shares until the expiration or sooner
termination of the option term or the surrender of the option in connection with
a Hostile Take-Over.

            C. All outstanding repurchase rights under this Automatic Option
Grant Program shall automatically terminate, and the shares of Common Stock
subject to those terminated rights shall immediately vest in full, in the event
of any Corporate Transaction or Change in Control.

            D. Upon the occurrence of a Hostile Take-Over while the Optionee
remains in Service, the Optionee shall have a thirty (30)-day period in which to
surrender to the Corporation each of his or her outstanding options under this
Automatic Option Grant Program. The Optionee shall in return be entitled to a
cash distribution from the Corporation in an amount equal to the excess of (i)
the Take-Over Price of the shares of Common Stock at the time subject

                                      21.
<PAGE>

to each surrendered option (whether or not the Optionee is otherwise at the time
vested in those shares) over (ii) the aggregate exercise price payable for such
shares. Such cash distribution shall be paid within five (5) days following the
surrender of the option to the Corporation. No approval or consent of the Board
or any Plan Administrator shall be required at the time of the actual option
surrender and cash distribution.

            E. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction. If
the holders of Common Stock receive cash consideration in connection with the
Corporate Transaction, the assumed option may be adjusted, at the option of the
successor corporation, to apply to the number of shares of its common stock with
a fair market value equivalent to the cash consideration paid per share of
Common Stock in such Corporate Transaction. Appropriate adjustments shall also
be made to the exercise price payable per share under each outstanding option,
provided the aggregate exercise price payable for such securities shall remain
the same.

            F. The grant of options under the Automatic Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.

      III.  REMAINING TERMS

            The remaining terms of each option granted under the Automatic
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.

                                       22.
<PAGE>

                                   ARTICLE SIX

                        DIRECTOR FEE OPTION GRANT PROGRAM

      I.    OPTION GRANTS

            The Primary Committee shall have the sole and exclusive authority to
determine the calendar year or years for which the Director Fee Option Grant
Program is to be in effect. For each such calendar year the program is in
effect, each non-employee Board member may elect to apply all or any portion of
the annual retainer fee otherwise payable in cash for his or her service on the
Board for that year to the acquisition of a special option grant under this
Director Fee Option Grant Program. Such election must be filed with the
Corporation's Chief Financial Officer prior to first day of the calendar year
for which the annual retainer fee which is the subject of that election is
otherwise payable. Each non-employee Board member who files such a timely
election shall automatically be granted an option under this Director Fee Option
Grant Program on the first trading day in January in the calendar year for which
the annual retainer fee which is the subject of that election would otherwise be
payable in cash.

      II.   OPTION TERMS

            Each option shall be a Non-Statutory Option governed by the terms
and conditions specified below.

            A.    EXERCISE PRICE.

                  1. The exercise price per share shall be thirty-three and
one-third percent (33-1/3%) of the Fair Market Value per share of Common Stock
on the option grant date.

                  2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.

            B. NUMBER OF OPTION SHARES. The number of shares of Common Stock
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):

                  X = A / (B x 66-2/3%), where

                  X is the number of option shares,

                  A is the portion of the annual retainer fee subject to the
            non-employee Board member's election, and

                  B is the Fair Market Value per share of Common Stock on the
            option grant date.

                                      23.
<PAGE>

            C. EXERCISE AND TERM OF OPTIONS. The option shall become exercisable
in a series of twelve (12) equal monthly installments upon the Optionee's
completion of each month of Board service over the twelve (12)-month period
measured from the grant date. Each option shall have a maximum term of ten (10)
years measured from the option grant date.

            D. LIMITED TRANSFERABILITY OF OPTIONS. Each option under this
Article Six may, in connection with the Optionee's estate plan, be assigned in
whole or in part during the Optionee's lifetime to one or more members of the
Optionee's immediate family or to a trust established exclusively for one or
more such family members. The assigned portion may only be exercised by the
person or persons who acquire a proprietary interest in the option pursuant to
the assignment. The terms applicable to the assigned portion shall be the same
as those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate. The Optionee may also designate one or more persons as the
beneficiary or beneficiaries of his or her outstanding options under this
Article Six, and those options shall, in accordance with such designation,
automatically be transferred to such beneficiary or beneficiaries upon the
Optionee's death while holding those options. Such beneficiary or beneficiaries
shall take the transferred options subject to all the terms and conditions of
the applicable agreement evidencing each such transferred option, including
(without limitation) the limited time period during which the option may be
exercised following the Optionee's death.

            E. TERMINATION OF BOARD SERVICE. Should the Optionee cease Board
service for any reason (other than death or Permanent Disability) while holding
one or more options under this Director Fee Option Grant Program, then each such
option shall remain exercisable, for any or all of the shares for which the
option is exercisable at the time of such cessation of Board service, until the
earlier of (i) the expiration of the ten (10)-year option term or (ii) the
expiration of the three (3)-year period measured from the date of such cessation
of Board service. However, each option held by the Optionee under this Director
Fee Option Grant Program at the time of his or her cessation of Board service
shall immediately terminate and cease to remain outstanding with respect to any
and all shares of Common Stock for which the option is not otherwise at that
time exercisable.

            F. DEATH OR PERMANENT DISABILITY. Should the Optionee's service as a
Board member cease by reason of death or Permanent Disability, then each option
held by such Optionee under this Director Fee Option Grant Program shall
immediately become exercisable for all the shares of Common Stock at the time
subject to that option, and the option may be exercised for any or all of those
shares as fully-vested shares until the earlier of (i) the expiration of the ten
(10)-year option term or (ii) the expiration of the three (3)-year period
measured from the date of such cessation of Board service. Should the Optionee
die after cessation of Board service but while holding one or more options under
this Director Fee Option Grant Program, then each such option may be exercised,
for any or all of the shares for which the option is exercisable at the time of
the Optionee's cessation of Board service (less any shares subsequently
purchased by Optionee prior to death), by the personal representative of the
Optionee's estate or by the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of descent and
distribution or by the designated beneficiary or beneficiaries of such option.
Such right of exercise shall lapse, and the option shall terminate,

                                      24.
<PAGE>

upon the earlier of (i) the expiration of the ten (10)-year option term or (ii)
the three (3)-year period measured from the date of the Optionee's cessation of
Board service.

      III.  CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

            A. In the event of any Corporate Transaction while the Optionee
remains a Board member, each outstanding option held by such Optionee under this
Director Fee Option Grant Program shall automatically accelerate so that each
such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable for the total number of shares of Common
Stock at the time subject to such option and may be exercised for any or all of
those shares as fully-vested shares of Common Stock. Each such outstanding
option shall terminate immediately following the Corporate Transaction, except
to the extent assumed by the successor corporation (or parent thereof) in such
Corporate Transaction. Any option so assumed and shall remain exercisable for
the fully-vested shares until the earliest of (i) the expiration of the ten
(10)-year option term, (ii) the expiration of the three (3)-year period measured
from the date of the Optionee's cessation of Board service or (iii) the
surrender of the option in connection with a Hostile Take-Over.

            B. In the event of a Change in Control while the Optionee remains in
Service, each outstanding option held by such Optionee under this Director Fee
Option Grant Program shall automatically accelerate so that each such option
shall immediately become fully exercisable for the total number of shares of
Common Stock at the time subject to such option and may be exercised for any or
all of those shares as fully-vested shares of Common Stock. The option shall
remain so exercisable until the earliest to occur of (i) the expiration of the
ten (10)-year option term, (ii) the expiration of the three (3)-year period
measured from the date of the Optionee's cessation of Board service, (iii) the
termination of the option in connection with a Corporate Transaction or (iv) the
surrender of the option in connection with a Hostile Take-Over.

            C. Upon the occurrence of a Hostile Take-Over while the Optionee
remains in Service, the Optionee shall have a thirty (30)-day period in which to
surrender to the Corporation each outstanding option granted him or her under
the Director Fee Option Grant Program. The Optionee shall in return be entitled
to a cash distribution from the Corporation in an amount equal to the excess of
(i) the Take-Over Price of the shares of Common Stock at the time subject to
each surrendered option (whether or not the Optionee is otherwise at the time
vested in those shares) over (ii) the aggregate exercise price payable for such
shares. Such cash distribution shall be paid within five (5) days following the
surrender of the option to the Corporation. No approval or consent of the Board
or any Plan Administrator shall be required at the time of the actual option
surrender and cash distribution.

            D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction. If
the holders of Common Stock receive cash consideration in connection with the
Corporate Transaction, the assumed option may be adjusted, at the option of the
successor corporation, to apply to the number of shares of its common stock with
a fair

                                      25.
<PAGE>

market value equivalent to the cash consideration paid per share of Common Stock
in such Corporate Transaction. Appropriate adjustments shall also be made to the
exercise price payable per share under each outstanding option, provided the
aggregate exercise price payable for such securities shall remain the same.

            E. The grant of options under the Director Fee Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.

      IV.   REMAINING TERMS

            The remaining terms of each option granted under this Director Fee
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.

                                      26.
<PAGE>

                                  ARTICLE SEVEN

                                  MISCELLANEOUS

      I.    FINANCING

            The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price under the Discretionary Option Grant Program or the
purchase price of shares issued under the Stock Issuance Program by delivering a
full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest rate
and the terms of repayment) shall be established by the Plan Administrator in
its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares (less the par value of
such shares) plus (ii) any Federal, state and local income and employment tax
liability incurred by the Optionee or the Participant in connection with the
option exercise or share purchase.

      II.   TAX WITHHOLDING

            A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options or the issuance or vesting of such shares under the
Plan shall be subject to the satisfaction of all applicable Federal, state and
local income and employment tax withholding requirements.

            B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan (other than the options granted or the shares issued under the Automatic
Option Grant or Director Fee Option Grant Program) with the right to use shares
of Common Stock in satisfaction of all or part of the Withholding Taxes to which
such holders may become subject in connection with the exercise of their options
or the vesting of their shares. Such right may be provided to any such holder in
either or both of the following formats:

               Stock Withholding: The election to have the Corporation withhold,
from the shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or the vesting of such shares, a portion of those shares
with an aggregate Fair Market Value equal to the percentage of the Withholding
Taxes (not to exceed one hundred percent (100%)) designated by the holder.

               Stock Delivery: The election to deliver to the Corporation, at
the time the Non-Statutory Option is exercised or the shares vest, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the Withholding
Taxes) with an aggregate Fair Market Value equal to the percentage of the
Withholding Taxes (not to exceed one hundred percent (100%)) designated by the
holder.

                                      27.
<PAGE>

      III.  EFFECTIVE DATE AND TERM OF THE PLAN

            A. The Plan shall become effective immediately on the Plan Effective
Date. However, the Salary Investment Option Grant Program and the Director Fee
Option Grant Program shall not be implemented until such time as the Primary
Committee may deem appropriate.

            B. The Plan shall serve as the successor to the Predecessor Plan,
and no further option grants or direct stock issuances shall be made under the
Predecessor Plan after the Plan Effective Date. All options outstanding under
the Predecessor Plan on the Plan Effective Date shall be incorporated into the
Plan at that time and shall be treated as outstanding options under the Plan.
However, each outstanding option so incorporated shall continue to be governed
solely by the terms of the documents evidencing such option, and no provision of
the Plan shall be deemed to affect or otherwise modify the rights or obligations
of the holders of such incorporated options with respect to their acquisition of
shares of Common Stock.

            C. The Plan was first amended on March 16, 2001 (the "2001
Restatement") to (a) effect certain changes to the provisions of the plan
document in order to facilitate the administration of the Plan and (b) make the
following changes to the Automatic Option Grant Program: (i) increase the number
of shares of Common Stock for which each new non-employee Board member is to be
granted a stock option at the time of his or her initial election or appointment
to the Board from 12,000 shares to 20,000 shares, (ii) increase the number of
shares of Common Stock for which each continuing non-employee Board member is to
be granted stock options at each Annual Stockholders Meeting from 3,000 shares
to 5,000 shares, beginning with the 2001 Annual Stockholders Meeting, and (iii)
eliminate, effective with the annual automatic option grants to be made to the
continuing non-employee Board members at the 2001 Annual Stockholders Meeting,
the requirement that a non-employee Board member serve in that capacity for at
least six (6) months before that individual first becomes eligible to receive
his or her first annual automatic option grant. The Plan was further amended and
restated by the Board on February 8, 2002 (the "2002 Restatement") to make the
following changes to the Automatic Option Grant Program: (i) increase the number
of shares of Common Stock for which each new non-employee Board member is to be
granted a stock option at the time of his or her initial election or appointment
to the Board from 20,000 shares to 30,000 shares, (ii) increase the number of
shares of Common Stock for which each continuing non-employee Board member is to
be granted stock options at each Annual Stockholders Meeting from 5,000 shares
to 15,000 shares, beginning with the 2002 Annual Stockholders Meeting, and (iii)
add, effective with the annual automatic option grants to be made to the
continuing non-employee Board members at the 2002 Annual Stockholders Meeting, a
twenty-four (24) month vesting period to such annual option grants whereby such
option would vest in a series of two (2) successive equal annual installments
upon the Optionee's completion of each twelve (12)-month period of service as a
Board member over the twenty-four (24)-month period measured from the option
grant date. All option grants made prior to the 2002 Restatement shall remain
outstanding in accordance with the terms and conditions of the respective
instruments evidencing those options, and nothing in the 2002 Restatement shall
be deemed to modify or in any way affect those outstanding options.

            D. One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Corporate Transactions and

                                      28.
<PAGE>

Changes in Control, may, in the Plan Administrator's discretion, be extended to
one or more options incorporated from the Predecessor Plan which do not
otherwise contain such provisions.

            E. The Plan shall terminate upon the earliest to occur of (i) May
18, 2009, (ii) the date on which all shares available for issuance under the
Plan shall have been issued as fully-vested shares or (iii) the termination of
all outstanding options in connection with a Corporate Transaction. Should the
Plan terminate on May 18, 2009, then all option grants and unvested stock
issuances outstanding at that time shall continue to have force and effect in
accordance with the provisions of the documents evidencing such grants or
issuances.

                                      29.
<PAGE>

      IV.   AMENDMENT OF THE PLAN

            A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects. However, no such amendment
or modification shall adversely affect the rights and obligations with respect
to stock options or unvested stock issuances at the time outstanding under the
Plan unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
pursuant to applicable laws or regulations.

            B. Options to purchase shares of Common Stock may be granted under
the Discretionary Option Grant and Salary Investment Option Grant Programs and
shares of Common Stock may be issued under the Stock Issuance Program that are
in each instance in excess of the number of shares then available for issuance
under the Plan, provided any excess shares actually issued under those programs
shall be held in escrow until there is obtained stockholder approval of an
amendment sufficiently increasing the number of shares of Common Stock available
for issuance under the Plan. If such stockholder approval is not obtained within
twelve (12) months after the date the first such excess issuances are made, then
(i) any unexercised options granted on the basis of such excess shares shall
terminate and cease to be outstanding and (ii) the Corporation shall promptly
refund to the Optionees and the Participants the exercise or purchase price paid
for any excess shares issued under the Plan and held in escrow, together with
interest (at the applicable Short Term Federal Rate) for the period the shares
were held in escrow, and such shares shall thereupon be automatically cancelled
and cease to be outstanding.

      V.    USE OF PROCEEDS

            Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.

      VI.   REGULATORY APPROVALS

            A. The implementation of the Plan, the granting of any stock option
under the Plan and the issuance of any shares of Common Stock (i) upon the
exercise of any granted option or (ii) under the Stock Issuance Program shall be
subject to the Corporation's procurement of all approvals and permits required
by regulatory authorities having jurisdiction over the Plan, the stock options
granted under it and the shares of Common Stock issued pursuant to it.

            B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.

                                      30.
<PAGE>

      VII.  NO EMPLOYMENT/SERVICE RIGHTS

            Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.

                                      31.
<PAGE>
                                    APPENDIX

            The following definitions shall be in effect under the Plan:

            A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option
grant program in effect under the Plan.

            B. BOARD shall mean the Corporation's Board of Directors.

            C. CHANGE IN CONTROL shall mean a change in ownership or control of
the Corporation effected through either of the following transactions:

                        (i) the acquisition, directly or indirectly by any
      person or related group of persons (other than the Corporation or a person
      that directly or indirectly controls, is controlled by, or is under common
      control with, the Corporation), of beneficial ownership (within the
      meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than
      fifty percent (50%) of the total combined voting power of the
      Corporation's outstanding securities pursuant to a tender or exchange
      offer made directly to the Corporation's stockholders, or

                        (ii) a change in the composition of the Board over a
      period of thirty-six (36) consecutive months or less such that a majority
      of the Board members ceases, by reason of one or more contested elections
      for Board membership, to be comprised of individuals who either (A) have
      been Board members continuously since the beginning of such period or (B)
      have been elected or nominated for election as Board members during such
      period by at least a majority of the Board members described in clause (A)
      who were still in office at the time the Board approved such election or
      nomination.

            D. CODE shall mean the Internal Revenue Code of 1986, as amended.

            E. COMMON STOCK shall mean the Corporation's common stock.

            F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:

                        (i) a merger or consolidation in which securities
      possessing more than fifty percent (50%) of the total combined voting
      power of the Corporation's outstanding securities are transferred to a
      person or persons different from the persons holding those securities
      immediately prior to such transaction, or

                        (ii) the sale, transfer or other disposition of all or
      substantially all of the Corporation's assets in complete liquidation or
      dissolution of the Corporation.

<PAGE>

            G. CORPORATION shall mean Packeteer, Inc., a Delaware corporation,
and any corporate successor to all or substantially all of the assets or voting
stock of Packeteer, Inc.. which shall by appropriate action adopt the Plan.

            H. DIRECTOR FEE OPTION GRANT PROGRAM shall mean the special stock
option grant in effect for non-employee Board members under Article Six of the
Plan.

            I. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary
option grant program in effect under the Plan.

            J. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.

            K. EXERCISE DATE shall mean the date on which the Corporation shall
have received written notice of the option exercise.

            L. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:

                        (i) If the Common Stock is at the time traded on the
      Nasdaq National Market, then the Fair Market Value shall be the closing
      selling price per share of Common Stock on the date in question, as such
      price is reported by the National Association of Securities Dealers on the
      Nasdaq National Market and published in The Wall Street Journal. If there
      is no closing selling price for the Common Stock on the date in question,
      then the Fair Market Value shall be the closing selling price on the last
      preceding date for which such quotation exists.

                        (ii) If the Common Stock is at the time listed on any
      Stock Exchange, then the Fair Market Value shall be the closing selling
      price per share of Common Stock on the date in question on the Stock
      Exchange determined by the Plan Administrator to be the primary market for
      the Common Stock, as such price is officially quoted in the composite tape
      of transactions on such exchange and published in The Wall Street Journal.
      If there is no closing selling price for the Common Stock on the date in
      question, then the Fair Market Value shall be the closing selling price on
      the last preceding date for which such quotation exists.

                        (iii) For purposes of any option grants made on the
      Underwriting Date, the Fair Market Value shall be deemed to be equal to
      the price per share at which the Common Stock is to be sold in the initial
      public offering pursuant to the Underwriting Agreement.

                                      A-1.
<PAGE>

            M. HOSTILE TAKE-OVER shall mean the acquisition, directly or
indirectly, by any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept.

            N. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.

            O. INVOLUNTARY TERMINATION shall mean the termination of the Service
of any individual which occurs by reason of:

                        (i) such individual's involuntary dismissal or discharge
      by the Corporation for reasons other than Misconduct, or

                        (ii) such individual's voluntary resignation following
      (A) a change in his or her position with the Corporation which materially
      reduces his or her duties and responsibilities or the level of management
      to which he or she reports, (B) a reduction in his or her level of
      compensation (including base salary, fringe benefits and target bonus
      under any corporate-performance based bonus or incentive programs) by more
      than fifteen percent (15%) or (C) a relocation of such individual's place
      of employment by more than fifty (50) miles, provided and only if such
      change, reduction or relocation is effected by the Corporation without the
      individual's consent.

            P. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).

            Q. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.

            R. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.

            S. OPTIONEE shall mean any person to whom an option is granted under
the Discretionary Option Grant, Salary Investment Option Grant, Automatic Option
Grant or Director Fee Option Grant Program.

                                       A-2.
<PAGE>

            T PARENT shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

            U. PARTICIPANT shall mean any person who is issued shares of Common
Stock under the Stock Issuance Program.

            V. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more. However, solely for purposes of the Automatic Option Grant
and Director Fee Option Grant Programs, Permanent Disability or Permanently
Disabled shall mean the inability of the non-employee Board member to perform
his or her usual duties as a Board member by reason of any medically
determinable physical or mental impairment expected to result in death or to be
of continuous duration of twelve (12) months or more.

            W. PLAN shall mean the Corporation's 1999 Stock Incentive Plan, as
set forth in this document.

            X. PLAN ADMINISTRATOR shall mean the particular entity, whether the
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.

            Y. PLAN EFFECTIVE DATE shall mean the date the Plan shall become
effective and shall be coincident with the Underwriting Date.

            Z. PREDECESSOR PLAN shall mean the Corporation's 1996 Equity
Incentive Plan in effect immediately prior to the Plan Effective Date hereunder.

            AA. PRIMARY COMMITTEE shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders and to administer the Salary Investment Option Grant Program solely
with respect to the selection of the eligible individuals who may participate in
such program.

            BB. SALARY INVESTMENT OPTION GRANT PROGRAM shall mean the salary
investment option grant program in effect under the Plan.

            CC. SECONDARY COMMITTEE shall mean a committee of one or more Board
members appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to eligible persons other than Section 16
Insiders.

                                       A-3.
<PAGE>

            DD. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.

            EE. SERVICE shall mean the performance of services for the
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant or stock issuance.

            FF. STOCK EXCHANGE shall mean either the American Stock Exchange or
the New York Stock Exchange.

            GG. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into
by the Corporation and the Participant at the time of issuance of shares of
Common Stock under the Stock Issuance Program.

            HH. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in
effect under the Plan.

            II. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.

            JJ. TAKE-OVER PRICE shall mean the greater of (i) the Fair Market
Value per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.

            KK. 10% STOCKHOLDER shall mean the owner of stock (as determined
under Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).

            LL. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.

            MM. UNDERWRITING DATE shall mean the date on which the Underwriting
Agreement is executed and priced in connection with an initial public offering
of the Common Stock.

            NN. WITHHOLDING TAXES shall mean the Federal, state and local income
and employment withholding taxes to which the holder of Non-Statutory Options or
unvested shares of Common Stock may become subject in connection with the
exercise of those options or the vesting of those shares.

                                       A-4.