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                                                                    EXHIBIT 10.3

                              WEBTRENDS CORPORATION

                     1997 STOCK INCENTIVE COMPENSATION PLAN


                               SECTION 1. PURPOSE

        The purpose of the WebTrends Corporation 1997 Stock Incentive
Compensation Plan (the "Plan") is to enhance the long-term shareholder value of
WebTrends Corporation, an Oregon corporation (the "Company"), by offering
opportunities to employees, directors, officers, consultants, agents, advisors
and independent contractors of the Company and its Subsidiaries (as defined in
Section 2) to participate in the Company's growth and success, and to encourage
them to remain in the service of the Company and its Subsidiaries and to acquire
and maintain stock ownership in the Company.


                             SECTION 2. DEFINITIONS

        For purposes of the Plan, the following terms shall be defined as set
forth below:

2.1     AWARD

        "Award" means an award or grant made to a Participant pursuant to the
Plan, including, without limitation, awards or grants of Options, Stock Awards,
or any combination of the foregoing.

2.2     BOARD

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

2.3     CODE

        "Code" means the Internal Revenue Code of 1986, as amended from time to
time.

2.4     COMMON STOCK

        "Common Stock" means the Common Stock of the Company as of the effective
date of the Plan, including the Class A Voting Common Stock, without par value,
and the Class B Non-voting Common Stock, without par value, of the Company.

2.5     CORPORATE TRANSACTION

        "Corporate Transaction" means any of the following events:

               (a) Consummation of any merger or consolidation of the Company in
        which the Company is not the continuing or surviving corporation, or
        pursuant to which shares





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        of the Common Stock are converted into cash, securities or other
        property, if following such merger or consolidation the holders of the
        Company's outstanding voting securities immediately prior to such merger
        or consolidation own less than 66-2/3% of the outstanding voting
        securities of the surviving corporation;

               (b) Consummation of any sale, lease, exchange or other transfer
        in one transaction or a series of related transactions of all or
        substantially all of the Company's assets other than a transfer of the
        Company's assets to a majority-owned subsidiary corporation (as the term
        "subsidiary corporation" is defined in Section 8.3) of the Company; or

               (c) Approval by the holders of the Common Stock of any plan or
        proposal for the liquidation or dissolution of the Company.

2.6     DISABILITY

        "Disability" has the meaning defined in Section 22(e)(3) of the Code.

2.7     EARLY RETIREMENT

        "Early Retirement" means early retirement as that term is defined by the
Plan Administrator from time to time for purposes of the Plan.

2.8     EXCHANGE ACT

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

2.9     FAIR MARKET VALUE

        "Fair Market Value" shall be as established in good faith by the Plan
Administrator or (a) if the Common Stock is listed on the Nasdaq National
Market, the closing selling price for the Common Stock as reported by the Nasdaq
National Market for a single trading day or (b) if the Common Stock is listed on
the New York Stock Exchange or the American Stock Exchange, the closing selling
price for the Common Stock as such price is officially quoted in the composite
tape of transactions on such exchange for a single trading day. If there is no
such reported price for the Common Stock for the date in question, then such
price on the last preceding date for which such price exists shall be
determinative of Fair Market Value.

2.10    GRANT DATE

        "Grant Date" means the date the Plan Administrator adopted the granting
resolution or a later date designated in a resolution of the Plan Administrator
as the date an Award is to be granted.





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2.11    HOLDER

        "Holder" means: (i) the Participant to whom an Award is granted; (ii)
for a Holder who has died, the personal representative of the Holder's estate,
the person(s) to whom the Holder's rights under an Award have passed by will or
by the applicable laws of descent and distribution, or the beneficiary
designated in accordance with Section 10; or (iii) the person(s) to whom an
Award has been transferred in accordance with Section 10.

2.12    INCENTIVE STOCK OPTION

        "Incentive Stock Option" means an Option to purchase Common Stock
granted under Section 7 with the intention that it qualify as an "incentive
stock option" as that term is defined in Section 422 of the Code.

2.13    NONQUALIFIED STOCK OPTION

        "Nonqualified Stock Option" means an Option to purchase Common Stock
granted under Section 7 other than an Incentive Stock Option.

2.14    OPTION

        "Option" means the right to purchase Common Stock granted under Section
7.

2.15    PARTICIPANT

        "Participant" means an individual who is a Holder of an Award or, as the
context may require, any employee, director, officer, consultant, agent, advisor
or independent contractor of the Company or a Subsidiary who has been designated
by the Plan Administrator as eligible to participate in the Plan.

2.16    PLAN ADMINISTRATOR

        "Plan Administrator" means the Board or any committee of the Board
designated to administer the Plan under Section 3.1.

2.17    RESTRICTED STOCK

        "Restricted Stock" means shares of Common Stock granted under Section 9,
the rights of ownership of which are subject to restrictions prescribed by the
Plan Administrator.

2.18    RETIREMENT

        "Retirement" means retirement as of the individual's normal retirement
date as that term is defined by the Plan Administrator from time to time for
purposes of the Plan.





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2.19    SECURITIES ACT

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

2.20    STOCK AWARD

        "Stock Award" means an award granted under Section 9.

2.21    SUBSIDIARY

        "Subsidiary," except as provided in Section 8.3 in connection with
Incentive Stock Options, means any entity that is directly or indirectly
controlled by the Company or in which the Company has a significant ownership
interest, as determined by the Plan Administrator, and any entity that may
become a direct or indirect parent of the Company.

2.22    SUCCESSOR CORPORATION

        "Successor Corporation" has the meaning set forth under Section 11.2.


                            SECTION 3. ADMINISTRATION

3.1     PLAN ADMINISTRATOR

        The Plan shall be administered by the Board or a committee or committees
(which term includes subcommittees) appointed by, and consisting of two or more
members of, the Board. If and so long as the Common Stock is registered under
Section 12(b) or 12(g) of the Exchange Act, the Board shall consider in
selecting the Plan Administrator and the membership of any committee acting as
Plan Administrator, with respect to any persons subject or likely to become
subject to Section 16 of the Exchange Act, the provisions regarding (a) "outside
directors" as contemplated by Section 162(m) of the Code and (b) "nonemployee
directors" as contemplated by Rule 16b-3 under the Exchange Act. The Board may
delegate the responsibility for administering the Plan with respect to
designated classes of eligible Participants to different committees consisting
of two or more members of the Board, subject to such limitations as the Board or
the Plan Administrator deems appropriate. Committee members shall serve for such
term as the Board may determine, subject to removal by the Board at any time.

3.2     ADMINISTRATION AND INTERPRETATION BY THE PLAN ADMINISTRATOR

        Except for the terms and conditions explicitly set forth in the Plan,
the Plan Administrator shall have exclusive authority, in its discretion, to
determine all matters relating to Awards under the Plan, including the selection
of individuals to be granted Awards, the type of Awards, the number of shares of
Common Stock subject to an Award, all terms, conditions, restrictions and
limitations, if any, of an Award and the terms of any instrument that evidences
the Award. The Plan Administrator shall also have exclusive authority to
interpret the Plan and may from time to time adopt, and change, rules and
regulations of general application for the Plan's administration. The Plan
Administrator's interpretation of the Plan and its rules and regulations, and
all actions taken and determinations made by the Plan Administrator pursuant to
the Plan, shall be





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conclusive and binding on all parties involved or affected. The Plan
Administrator may delegate administrative duties to such of the Company's
officers as it so determines.


                      SECTION 4. STOCK SUBJECT TO THE PLAN

4.1     AUTHORIZED NUMBER OF SHARES

        Subject to adjustment from time to time as provided in Section 11.1, a
maximum of 1,534,524 shares of Common Stock shall be available for issuance
under the Plan. Shares issued under the Plan shall be drawn from authorized and
unissued shares or shares now held or subsequently acquired by the Company.

4.2     REUSE OF SHARES

        Any shares of Common Stock that have been made subject to an Award that
cease to be subject to the Award (other than by reason of exercise or payment of
the Award to the extent it is exercised for or settled in shares) shall again be
available for issuance in connection with future grants of Awards under the
Plan.


                             SECTION 5. ELIGIBILITY

        Awards may be granted under the Plan to those officers, directors and
employees of the Company and its Subsidiaries as the Plan Administrator from
time to time selects. Awards may also be made to consultants, agents, advisors
and independent contractors who provide services to the Company and its
Subsidiaries.


                                SECTION 6. AWARDS

6.1     FORM AND GRANT OF AWARDS

        The Plan Administrator shall have the authority, in its sole discretion,
to determine the type or types of Awards to be made under the Plan. Such Awards
may include, but are not limited to, Incentive Stock Options, Nonqualified Stock
Options and Stock Awards. Awards may be granted singly, in combination or in
tandem so that the settlement or payment of one automatically reduces or cancels
the other. Awards may also be made in combination or in tandem with, in
replacement of, as alternatives to, or as the payment form for, grants or rights
under any other employee or compensation plan of the Company.

6.2     ACQUIRED COMPANY AWARDS

        Notwithstanding anything in the Plan to the contrary, the Plan
Administrator may grant Awards under the Plan in substitution for awards issued
under other plans, or assume under the Plan awards issued under other plans, if
the other plans are or were plans of other acquired entities ("Acquired
Entities") (or the parent of the Acquired Entity) and the new Award is
substituted, or the old award is assumed, by reason of a merger, consolidation,
acquisition of property or of stock, reorganization or liquidation (the
"Acquisition Transaction"). In the event that a written agreement pursuant to
which the Acquisition Transaction is completed is approved





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by the Board and said agreement sets forth the terms and conditions of the
substitution for or assumption of outstanding awards of the Acquired Entity,
said terms and conditions shall be deemed to be the action of the Plan
Administrator without any further action by the Plan Administrator, except as
may be required for compliance with Rule 16b-3 under the Exchange Act, and the
persons holding such Awards shall be deemed to be Participants and Holders.


                          SECTION 7. AWARDS OF OPTIONS

7.1     GRANT OF OPTIONS

        The Plan Administrator is authorized under the Plan, in its sole
discretion, to issue Options as Incentive Stock Options or as Nonqualified Stock
Options, which shall be appropriately designated.

7.2     OPTION EXERCISE PRICE

        The exercise price for shares purchased under an Option shall be as
determined by the Plan Administrator, but shall not be less than 100% of the
Fair Market Value of the Common Stock on the Grant Date with respect to
Incentive Stock Options and not less than 85% of the Fair Market Value of the
Common Stock on the Grant Date with respect to Nonqualified Stock Options.

7.3     TERM OF OPTIONS

        The term of each Option shall be as established by the Plan
Administrator or, if not so established, shall be 10 years from the Grant Date.

7.4     EXERCISE OF OPTIONS

        The Plan Administrator shall establish and set forth in each instrument
that evidences an Option the time at which or the installments in which the
Option shall vest and become exercisable, which provisions may be waived or
modified by the Plan Administrator at any time. If not so established in the
instrument evidencing the Option, the Option will vest and become exercisable
according to the following schedule, which may be waived or modified by the Plan
Administrator at any time:























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<TABLE>
<CAPTION>
==========================================================================================

 Period of Holder's Continuous Employment with
 or Service To the Company or Its Subsidiaries              Percent of Total Option
          From the Option Grant Date                     That Is Vested and Exercisable
------------------------------------------------------------------------------------------
<S>                                                                   <C>
                 After 1 year                                         25%
------------------------------------------------------------------------------------------
                 After 2 years                                        50%
------------------------------------------------------------------------------------------
                 After 3 years                                        75%
------------------------------------------------------------------------------------------
                 After 4 years                                        100%
==========================================================================================
</TABLE>

        To the extent that the right to purchase shares has accrued thereunder,
an Option may be exercised from time to time by written notice to the Company,
in accordance with procedures established by the Plan Administrator, setting
forth the number of shares with respect to which the Option is being exercised
and accompanied by payment in full as described in Section 7.5. The Plan
Administrator may determine at any time that an Option may not be exercised as
to less than 100 shares at any one time (or the lesser number of vested
remaining shares covered by the Option).

7.5     PAYMENT OF EXERCISE PRICE

        The exercise price for shares purchased under an Option shall be paid in
full to the Company by delivery of consideration equal to the product of the
Option exercise price and the number of shares purchased. Such consideration
must be paid in cash or by check, or, unless the Plan Administrator in its sole
discretion determines otherwise, either at the time the Option is granted or at
any time before it is exercised, a combination of cash and/or check (if any) and
one or both of the following alternative forms: (a) tendering (either actually
or, if and so long as the Common Stock is registered under Section 12(b) or
12(g) of the Exchange Act, by attestation) Common Stock already owned by the
Holder for at least six months (or any shorter period necessary to avoid a
charge to the Company's earnings for financial reporting purposes) having a Fair
Market Value on the day prior to the exercise date equal to the aggregate Option
exercise price or (b) if and so long as the Common Stock is registered under
Section 12(b) or 12(g) of the Exchange Act, delivery of a properly executed
exercise notice, together with irrevocable instructions, to (i) a brokerage firm
designated by the Company to deliver promptly to the Company the aggregate
amount of sale or loan proceeds to pay the Option exercise price and any
withholding tax obligations that may arise in connection with the exercise and
(ii) the Company to deliver the certificates for such purchased shares directly
to such brokerage firm, all in accordance with the regulations of the Federal
Reserve Board. In addition, to the extent permitted by the Plan Administrator in
its sole discretion, the price for shares purchased under an Option may be paid,
either singly or in combination with one or more of the alternative forms of
payment authorized by this Section 7.5 by (y) a promissory note delivered
pursuant to Section 13 or (z) such other consideration as the Plan Administrator
may permit.





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7.6     POST-TERMINATION EXERCISES

        The Plan Administrator shall establish and set forth in each instrument
that evidences an Option whether the Option will continue to be exercisable, and
the terms and conditions of such exercise, if a Holder ceases to be employed by,
or to provide services to, the Company or its Subsidiaries, which provisions may
be waived or modified by the Plan Administrator at any time. If not so
established in the instrument evidencing the Option, the Option will be
exercisable according to the following terms and conditions, which may be waived
or modified by the Plan Administrator at any time.

        In case of termination of the Holder's employment or services other than
by reason of death, the Option shall be exercisable, to the extent of the number
of shares purchasable by the Holder at the date of such termination, only (a)
within one year if the termination of the Holder's employment or services is
coincident with Retirement, Early Retirement at the Company's request or
Disability or (b) within thirty days after the date the Holder ceases to be an
employee, director, officer, consultant, agent, advisor or independent
contractor of the Company or a Subsidiary if termination of the Holder's
employment or services is for any reason other than Retirement, Early Retirement
at the Company's request or Disability, but in no event later than the remaining
term of the Option. Any Option exercisable at the time of the Holder's death may
be exercised, to the extent of the number of shares purchasable by the Holder at
the date of the Holder's death, by the personal representative of the Holder's
estate, the person(s) to whom the Holder's rights under the Award have passed by
will or the applicable laws of descent and distribution or the beneficiary
designated pursuant to Section 10 at any time or from time to time within one
year after the date of death, but in no event later than the remaining term of
the Option. Any portion of an Option that is not exercisable on the date of
termination of the Holder's employment or services shall terminate on such date,
unless the Plan Administrator determines otherwise.

        A transfer of employment or services between or among the Company and
its Subsidiaries shall not be considered a termination of employment or services
for purposes of this Section 7.6. The effect of a Company-approved leave of
absence on the terms and conditions of an Option shall be determined by the Plan
Administrator, in its sole discretion.


                  SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS

        To the extent required by Section 422 of the Code, Incentive Stock
Options shall be subject to the following additional terms and conditions:

8.1     DOLLAR LIMITATION

        To the extent the aggregate Fair Market Value (determined as of the
Grant Date) of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time during any calendar year (under the Plan and all
other stock option plans of the Company) exceeds $100,000, such portion in
excess of $100,000 shall be treated as a Nonqualified Stock Option. In the event
the Participant holds two or more such Options that become exercisable for





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the first time in the same calendar year, such limitation shall be applied on
the basis of the order in which such Options are granted.

8.2     10% SHAREHOLDERS

        If a Participant owns more than 10% of the total voting power of all
classes of the Company's stock, then the exercise price per share of an
Incentive Stock Option shall not be less than 110% of the Fair Market Value of
the Common Stock on the Grant Date and the Option term shall not exceed five
years. The determination of 10% ownership shall be made in accordance with
Section 422 of the Code.

8.3     ELIGIBLE EMPLOYEES

        Individuals who are not employees of the Company or one of its parent
corporations or subsidiary corporations may not be granted Incentive Stock
Options. For purposes of this Section 8.3, "parent corporation" and "subsidiary
corporation" shall have the meanings attributed to those terms for purposes of
Section 422 of the Code.

8.4     TERM

        The term of an Incentive Stock Option shall not exceed 10 years.

8.5     EXERCISABILITY

        To qualify for Incentive Stock Option tax treatment, an Option
designated as an Incentive Stock Option must be exercised within three months
after termination of employment for reasons other than death, except that, in
the case of termination of employment due to total disability, such Option must
be exercised within one year after such termination. Employment shall not be
deemed to continue beyond the first 90 days of a leave of absence unless the
Participant's reemployment rights are guaranteed by statute or contract. For
purposes of this Section 8.5, "total disability" shall mean a mental or physical
impairment of the Participant that is expected to result in death or that has
lasted or is expected to last for a continuous period of 12 months or more and
that causes the Participant to be unable, in the opinion of the Company and two
independent physicians, to perform his or her duties for the Company and to be
engaged in any substantial gainful activity. Total disability shall be deemed to
have occurred on the first day after the Company and the two independent
physicians have furnished their opinion of total disability to the Plan
Administrator.

8.6     TAXATION OF INCENTIVE STOCK OPTIONS

        In order to obtain certain tax benefits afforded to Incentive Stock
Options under Section 422 of the Code, the Participant must hold the shares
issued upon the exercise of an Incentive Stock Option for two years after the
Grant Date of the Incentive Stock Option and one year from the date of exercise.
A Participant may be subject to the alternative minimum tax at the time of
exercise of an Incentive Stock Option. The Plan Administrator may require a





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Participant to give the Company prompt notice of any disposition of shares
acquired by the exercise of an Incentive Stock Option prior to the expiration of
such holding periods.

8.7     PROMISSORY NOTES

        The amount of any promissory note delivered pursuant to Section 13 in
connection with an Incentive Stock Option shall bear interest at a rate
specified by the Plan Administrator but in no case less than the rate required
to avoid imputation of interest (taking into account any exceptions to the
imputed interest rules) for federal income tax purposes.


                             SECTION 9. STOCK AWARDS

9.1     GRANT OF STOCK AWARDS

        The Plan Administrator is authorized to make Awards of Common Stock to
Participants on such terms and conditions and subject to such restrictions, if
any (which may be based on continuous service with the Company or the
achievement of performance goals, as the Plan Administrator shall determine, in
its sole discretion, which terms, conditions and restrictions shall be set forth
in the instrument evidencing the Award. The terms, conditions and restrictions
that the Plan Administrator shall have the power to determine shall include,
without limitation, the manner in which shares subject to Stock Awards are held
during the periods they are subject to restrictions and the circumstances under
which forfeiture of Restricted Stock shall occur by reason of termination of the
Holder's employment or services.

9.2     ISSUANCE OF SHARES

        Upon the satisfaction of any terms, conditions and restrictions
prescribed in respect to a Stock Award, or upon the Holder's release from any
terms, conditions and restrictions of a Stock Award, as determined by the Plan
Administrator, the Company shall release, as soon as practicable, to the Holder
or, in the case of the Holder's death, to the personal representative of the
Holder's estate or as the appropriate court directs, the appropriate number of
shares of Common Stock.

9.3     WAIVER OF RESTRICTIONS

        Notwithstanding any other provisions of the Plan, the Plan Administrator
may, in its sole discretion, waive the forfeiture period and any other terms,
conditions or restrictions on any Restricted Stock under such circumstances and
subject to such terms and conditions as the Plan Administrator shall deem
appropriate.


                            SECTION 10. ASSIGNABILITY

        No Option, or Stock Award granted under the Plan may be assigned or
transferred by the Holder other than by will or by the applicable laws of
descent and distribution, and, during the Holder's lifetime, such Awards may be
exercised only by the Holder or a permitted assignee or transferee of the Holder
(as provided below). Notwithstanding the foregoing, and to the extent





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permitted by Section 422 of the Code, the Plan Administrator, in its sole
discretion, may permit such assignment, transfer and exercisability and may
permit a Holder of such Awards to designate a beneficiary who may exercise the
Award or receive compensation under the Award after the Holder's death.


                             SECTION 11. ADJUSTMENTS

11.1    ADJUSTMENT OF SHARES

        In the event that, at any time or from time to time, a stock dividend,
stock split, spin-off, combination or exchange of shares, recapitalization,
merger, consolidation, distribution to shareholders other than a normal cash
dividend or other change in the Company's corporate or capital structure results
in (a) the outstanding shares, or any securities exchanged therefor or received
in their place, being exchanged for a different number or class of securities of
the Company or of any other corporation or (b) new, different or additional
securities of the Company or of any other corporation being received by the
holders of shares of Common Stock of the Company, then the Plan Administrator
shall make proportional adjustments in (i) the maximum number and kind of
securities subject to the Plan as set forth in Section 4.1 and (ii) the number
and kind of securities that are subject to any outstanding Award and the per
share price of such securities, without any change in the aggregate price to be
paid therefor. The determination by the Plan Administrator as to the terms of
any of the foregoing adjustments shall be conclusive and binding.

11.2    CORPORATE TRANSACTION

        Except as otherwise provided in the instrument that evidences the Award,
in the event of any Corporate Transaction, each Award that is at the time
outstanding shall terminate, but each Participant shall have the right
immediately prior to any such Corporate Transaction to exercise such
Participant's Award to the extent the vesting requirements applicable to such
Award have been satisfied. Such Award shall not so terminate, however, if and to
the extent that such Award is, in connection with the Corporate Transaction,
assumed by the successor corporation or parent thereof (the "Successor
Corporation").

11.3    FURTHER ADJUSTMENT OF AWARDS

        Subject to Section 11.2, the Plan Administrator shall have the
discretion, exercisable at any time before a sale, merger, consolidation,
reorganization, liquidation or change in control of the Company, as defined by
the Plan Administrator, to take such further action as it determines to be
necessary or advisable, and fair and equitable to Participants, with respect to
Awards. Such authorized action may include (but shall not be limited to)
establishing, amending or waiving the type, terms, conditions or duration of, or
restrictions on, Awards so as to provide for earlier, later, extended or
additional time for exercise, payment or settlement or lifting restrictions,
differing methods for calculating payments or settlements, alternate forms and
amounts of payments and settlements and other modifications, and the Plan
Administrator may take such actions with respect to all Participants, to certain
categories of Participants or only to individual Participants. The Plan
Administrator may take such action before or after granting Awards to which the
action





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relates and before or after any public announcement with respect to such sale,
merger, consolidation, reorganization, liquidation or change in control that is
the reason for such action.

11.4    LIMITATIONS

        The grant of Awards will in no way affect the Company's right 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.


                             SECTION 12. WITHHOLDING

        The Company may require the Holder to pay to the Company the amount of
any withholding taxes that the Company is required to withhold with respect to
the grant, exercise, payment or settlement of any Award. Subject to the Plan and
applicable law and unless the Plan Administrator determines otherwise, the
Holder may satisfy withholding obligations, in whole or in part, by paying cash,
by electing to have the Company withhold shares of Common Stock or by
transferring shares of Common Stock to the Company, in such amounts as are
equivalent to the Fair Market Value of the withholding obligation. The Company
shall have the right to withhold from any Award or any shares of Common Stock
issuable pursuant to an Award or from any cash amounts otherwise due or to
become due from the Company to the Participant an amount equal to such taxes.
The Company may also deduct from any Award any other amounts due from the
Participant to the Company or a Subsidiary.


                   SECTION 13. LOANS, INSTALLMENT PAYMENTS AND
                                 LOAN GUARANTEES

        To assist a Holder (including a Holder who is an officer or a director
of the Company) in acquiring shares of Common Stock pursuant to an Award granted
under the Plan, the Plan Administrator, in its sole discretion, may authorize,
either at the Grant Date or at any time before the acquisition of Common Stock
pursuant to the Award, (a) the extension of a loan to the Holder by the Company,
(b) the payment by the Holder of the purchase price, if any, of the Common Stock
in installments, or (c) the guarantee by the Company of a loan obtained by the
grantee from a third party. The terms of any loans, installment payments or loan
guarantees, including the interest rate and terms of and security for repayment,
will be subject to the Plan Administrator's discretion; provided, however, that
any loan shall be with full recourse. Loans, installment payments and loan
guarantees may be granted with or without security. The maximum credit available
is the purchase price, if any, of the Common Stock acquired, plus the maximum
federal and state income and employment tax liability that may be incurred in
connection with the acquisition.


                  SECTION 14. AMENDMENT AND TERMINATION OF PLAN

14.1    AMENDMENT OF PLAN

        The Plan may be amended only by the Board as it shall deem advisable;
however, to the extent required for compliance with Section 422 of the Code or
any applicable law or regulation,





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approval of the shareholders will be required for any amendment that will (a)
increase the total number of shares as to which Options may be granted under the
Plan or that may be issued as Stock Awards, (b) modify the class of persons
eligible to receive Options, or (c) otherwise require shareholder approval under
any applicable law or regulation.

14.2    TERMINATION OF PLAN

        The Board may suspend or terminate the Plan at any time. The Plan will
have no fixed expiration date; provided, however, that no Incentive Stock
Options may be granted more than 10 years after the earlier of the Plan's
adoption by the Board and approval by the shareholders.

14.3    CONSENT OF HOLDER

        The amendment or termination of the Plan shall not, without the consent
of the Holder of any Award under the Plan, impair or diminish any rights or
obligations under any Award theretofore granted under the Plan. Any change or
adjustment to an outstanding Incentive Stock Option shall not, without the
consent of the Holder, be made in a manner so as to constitute a "modification"
that would cause such Incentive Stock Option to fail to continue to qualify as
an Incentive Stock Option.


                               SECTION 15. GENERAL

15.1    AWARD AGREEMENTS

        Awards granted under the Plan shall be evidenced by a written agreement
that shall contain such terms, conditions, limitations and restrictions as the
Plan Administrator shall deem advisable and that are not inconsistent with the
Plan.

15.2    CONTINUED EMPLOYMENT OR SERVICES; RIGHTS IN AWARDS

        None of the Plan, participation in the Plan as a Participant or any
action of the Plan Administrator taken under the Plan shall be construed as
giving any Participant or employee of the Company any right to be retained in
the employ of the Company or limit the Company's right to terminate the
employment or services of the Participant.

15.3    REGISTRATION

        The Company shall be under no obligation to any Participant to register
for offering or resale or to qualify for exemption under the Securities Act, or
to register or qualify under state securities laws, any shares of Common Stock,
security or interest in a security paid or issued under, or created by, the
Plan, or to continue in effect any such registrations or qualifications if made.
The Company may issue certificates for shares with such legends and subject to
such restrictions on transfer and stop-transfer instructions as counsel for the
Company deems necessary or desirable for compliance by the Company with federal
and state securities laws.

        Inability of the Company to obtain, from any regulatory body having
jurisdiction, the authority deemed by the Company's counsel to be necessary for
the lawful issuance and sale of





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<PAGE>   14

any shares hereunder or the unavailability of an exemption from registration for
the issuance and sale of any shares hereunder shall relieve the Company of any
liability in respect of the nonissuance or sale of such shares as to which such
requisite authority shall not have been obtained.

        As a condition to the exercise of an Option or any other receipt of
Common Stock pursuant to an Award under the Plan, the Company may require the
Participant to represent and warrant at the time of any such exercise or receipt
that such shares are being purchased or received only for the Participant's own
account and without any present intention to sell or distribute such shares if,
in the opinion of counsel for the Company, such a representation is required by
any relevant provision of the aforementioned laws. At the option of the Company,
a stop-transfer order against any such shares may be placed on the official
stock books and records of the Company, and a legend indicating that such shares
may not be pledged, sold or otherwise transferred, unless an opinion of counsel
is provided (concurred in by counsel for the Company) stating that such transfer
is not in violation of any applicable law or regulation, may be stamped on stock
certificates in order to ensure exemption from registration. The Plan
Administrator may also require such other action or agreement by the Participant
as may from time to time be necessary to comply with the federal and state
securities laws.

15.4    NO RIGHTS AS A SHAREHOLDER

        No Award shall entitle the Holder to any cash dividend, voting or other
right of a shareholder unless and until the date of issuance under the Plan of
the shares that are the subject of such Award, free of all applicable
restrictions.

15.5    COMPLIANCE WITH LAWS AND REGULATIONS

        Notwithstanding anything in the Plan to the contrary, the Board, in its
sole discretion, may bifurcate the Plan so as to restrict, limit or condition
the use of any provision of the Plan to Participants who are officers or
directors subject to Section 16 of the Exchange Act without so restricting,
limiting or conditioning the Plan with respect to other Participants.
Additionally, in interpreting and applying the provisions of the Plan, any
Option granted as an Incentive Stock Option pursuant to the Plan shall, to the
extent permitted by law, be construed as an "incentive stock option" within the
meaning of Section 422 of the Code.

15.6    NO TRUST OR FUND

        The Plan is intended to constitute an "unfunded" plan. Nothing contained
herein shall require the Company to segregate any monies or other property, or
shares of Common Stock, or to create any trusts, or to make any special deposits
for any immediate or deferred amounts payable to any Participant, and no
Participant shall have any rights that are greater than those of a general
unsecured creditor of the Company.





                                      -14-
<PAGE>   15

15.7    SEVERABILITY

        If any provision of the Plan or any Award is determined to be invalid,
illegal or unenforceable in any jurisdiction, or as to any person, or would
disqualify the Plan or any Award under any law deemed applicable by the Plan
Administrator, such provision shall be construed or deemed amended to conform to
applicable laws, or, if it cannot be so construed or deemed amended without, in
the Plan Administrator's determination, materially altering the intent of the
Plan or the Award, such provision shall be stricken as to such jurisdiction,
person or Award, and the remainder of the Plan and any such Award shall remain
in full force and effect.


                 SECTION 16. REPURCHASE AND FIRST REFUSAL RIGHTS

16.1    REPURCHASE RIGHTS

        The Plan Administrator shall have the discretion to authorize the
issuance of unvested shares of Common Stock pursuant to the exercise of an
Option. Should the Holder cease to be employed by or provide services to the
Company, then all shares of Common Stock issued upon exercise of an Option which
are unvested at the time of cessation of employment or services shall be subject
to repurchase at the exercise price paid for such shares. The terms and
conditions upon which such repurchase right shall be exercisable (including the
period and procedure for exercise) shall be established by the Plan
Administrator and set forth in the agreement evidencing such right.

        All of the Company's outstanding repurchase rights under this Section
16.1 are assignable by the Company at any time. Such rights shall automatically
terminate, and all shares subject to such terminated rights shall immediately
vest in full, upon the occurrence of a Corporate Transaction, except to the
extent: (i) any such repurchase right is expressly assigned to the Successor
Corporation in connection with the Corporate Transaction or (ii) such
termination is precluded by other limitations imposed by the Plan Administrator
at the time the repurchase right is issued.

        The Plan Administrator shall have the discretionary authority,
exercisable either before or after the Holder's cessation of employment or
service, to cancel the Company's outstanding repurchase rights with respect to
one or more shares purchased or purchasable by the Holder under an Option and
thereby accelerate the vesting of such shares in whole or in part at any time.

16.2    FIRST REFUSAL RIGHTS

        Until the date on which the initial registration of the Common Stock
under Section 12(b) or 12(g) of the Exchange Act first becomes effective, the
Company shall have the right of first refusal with respect to any proposed sale
or other disposition by the Holder of any shares of Common Stock issued pursuant
to an Award granted under the Plan. Such right of first refusal shall be
exercisable in accordance with the terms and conditions established by the Plan
Administrator and set forth in the agreement evidencing such right.





                                      -15-
<PAGE>   16

                           SECTION 17. MARKET STANDOFF

        In connection with any underwritten public offering by the Company of
its equity securities pursuant to an effective registration statement filed
under the Securities Act, including the Company's initial public offering, a
Participant shall not sell, make any short sale of, loan, hypothecate, pledge,
grant any option for the purchase of, or otherwise dispose or transfer for value
or otherwise agree to engage in any of the foregoing transactions with respect
to, any shares issued pursuant to an Award granted under the Plan without the
prior written consent of the Company or its underwriters. Such limitations shall
be in effect for such period of time as may be requested by the Company or such
underwriters and agreed to by the Company's officers and directors with respect
to their shares; provided, however, that in no event shall such period exceed
180 days. The limitations of this paragraph shall in all events terminate two
years after the effective date of the Company's initial public offering.
Participants shall be subject to the market standoff provisions of this
paragraph only if the officers and directors of the Company are also subject to
similar arrangements.

        In the event of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
Company's outstanding Common Stock effected as a class without the Company's
receipt of consideration, then any new, substituted or additional securities
distributed with respect to the purchased shares shall be immediately subject to
the provisions of this Section 17, to the same extent the purchased shares are
at such time covered by such provisions.

        In order to enforce the limitations of this Section 17, the Company may
impose stop-transfer instructions with respect to the purchased shares until the
end of the applicable standoff period.


                           SECTION 18. EFFECTIVE DATE

        The Plan's effective date is the date on which it is adopted by the
Board, so long as it is approved by the Company's shareholders at any time
within 12 months of such adoption or, if earlier, and to the extent required for
compliance with Rule 16b-3 under the Exchange Act, at the next annual meeting of
the Company's shareholders after adoption of the Plan by the Board.

        Adopted by the Board on December 5, 1997, and approved by the Company's
shareholders on December 5, 1997.

















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