SCIENTIFIC LEARNING
CORPORATION 



1999 EQUITY INCENTIVE
PLAN 



                                             Adopted February 19, 1996
Approved By Stockholders March 30, 1996

Amended and Restated September 27, 1996

Approved By Stockholders June 11, 1997

Amended March 11, 1999

Amended and Restated May 17, 1999

Approved By Stockholders May 28, 1999

Amended March 8, 2000

Approved By Stockholders May 18, 2000

Amended May 30, 2002

Amended October 9, 2002

Amended February 25, 2003

Approved By Stockholders ______, 2003

Termination Date:  May 17, 2009




     1.     PURPOSES. 



        (a)              The
Plan initially was established effective as of February 19, 1996 (the           “Prior
Plan”). The Prior Plan hereby is amended and restated in its           entirety as
the Plan, effective as of the date of the closing of the initial           public
offering (“IPO”) of the common stock of the Company           (“Common
Stock”). The terms of the Prior Plan shall remain in effect           and apply to
all options granted pursuant to the Prior Plan.  



        (b)              The
purpose of the Plan is to provide a means by which selected Employees,
          Directors and Consultants may be given an opportunity to benefit from increases
          in value of the Common Stock through the granting of (i) Incentive Stock
          Options, (ii) Nonstatutory Stock Options, (iii) stock bonuses, (iv) rights to
          purchase restricted stock and (v) Stock Appreciation Rights.  



        (c)              The
Company, by means of the Plan, seeks to retain the services of persons who           are
now Employees, Directors or Consultants, to secure and retain the services           of
new Employees, Directors and Consultants and to provide incentives for such
          persons to exert maximum efforts for the success of the Company and its
          Affiliates.  



        (d)              The
Company intends that the Stock Awards issued under the Plan shall, in the
          discretion of the Board or any Committee to which responsibility for
          administration of the Plan has been delegated pursuant to subsection 3(c), be
          either (i) Options granted pursuant to Section 6 hereof, including
          Incentive Stock Options and Nonstatutory Stock Options, (ii) stock bonuses or
          rights to purchase restricted stock granted pursuant to Section 7 hereof or
          (iii) Stock Appreciation Rights granted pursuant to Section 8 hereof. All
          Options shall be separately designated Incentive Stock Options or Nonstatutory
          Stock Options at the time of grant, and in such form as issued pursuant to
          Section 6, and a separate certificate or certificates will be issued for shares
          purchased on exercise of each type of Option.  





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     2.    
          DEFINITIONS. 



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



        (b)    “Board” means
the Board of Directors of the           Company.  



        (c)    “Code” means
the Internal Revenue Code of 1986,           as amended.  



        (d)    “Committee” means
a Committee appointed by the           Board in accordance with subsection 3(c) of
the Plan.  



        (e)    “Company” means
Scientific Learning Corporation,           a Delaware corporation.  



        (f)    “Consultant” means
any person, including an           advisor, engaged by the Company or an Affiliate to
render consulting services           and who is compensated for such services, provided
that the term           “Consultant” shall not include Directors who are paid
only a           director’s fee by the Company or who are not compensated by the
Company for           their services as Directors.  



        (g)    “Continuous
Service” means that the           Optionee’s employment or
service with the Company or an Affiliate of the           Company, whether in the
capacity of an Employee, a Director or a Consultant, is           not interrupted or
terminated. The Optionee’s Continuous Service shall not           be deemed to have
terminated merely because of a change in the capacity in which           the Optionee
renders employment or service to the Company or an Affiliate or the           Company or
a change in the entity for which the Optionee renders such employment           or
service, provided that there is no interruption or termination of the           Optionee’s
Continuous Service. The Board or the Chief Executive Officer of           the Company, in
that party’s sole discretion, may determine whether           Continuous Service
shall be considered interrupted in the case of any leave of           absence approved by
the Board or the Chief Executive Officer of the Company,           including sick leave,
military leave, or any other personal leave.  



        (h)    “Covered
Employee” means the Chief Executive           Officer and the four
(4) other highest compensated officers of the Company for           whom total
compensation is required to be reported to stockholders under the           Exchange Act,
as determined for purposes of Section 162(m) of the Code.  



        (i)    “Director” means
a member of the Board.  



        (j)    “Disability” means
the inability of a person, in           the opinion of a qualified physician acceptable
to the Company, to perform the           major duties of that person’s position with
the Company or an Affiliate of           the Company because of the sickness or injury of
the person.  



        (k)    “Employee” means
any person, including Officers           and Directors, employed by the Company or any
Affiliate of the Company. Neither           service as a Director nor payment of a
director’s fee by the Company shall           be sufficient to constitute “employment” by
the Company.  



        (l)    “Exchange
Act” means the Securities Exchange Act           of 1934, as amended.  





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        (m)    “Fair
Market Value” means, as of any date, the           value of the
Common Stock of the Company determined as follows:  



                        (1)              If
the Common Stock is listed on any established stock exchange, traded on the
          Nasdaq National Market or the Nasdaq SmallCap Market, or quoted on the OTC
          Bulletin Board, the Fair Market Value of a share of Common Stock shall be the
          closing sales price for such stock (or the closing bid, if no sales were
          reported) as quoted on such exchange, market or board (or the exchange or
market           with the greatest volume of trading in Common Stock) on the trading day
prior to           the day of determination, as reported in the Wall Street Journal or
such other           source as the Board deems reliable;  



                        (2)              In
the absence of such markets for the Common Stock, the Fair Market Value shall
          be determined in good faith by the Board and to the extent that the Company is
          subject to Section 260.140.50 of Title 10 of the California Code of Regulations
          at the time a Stock Award is granted, in a manner consistent with Section
          260.140.50 of Title 10 of the California Code of Regulations.  



        (n)    “Incentive
Stock Option” means an Option intended           to qualify as an
incentive stock option within the meaning of Section 422           of the Code and
the regulations promulgated thereunder.  



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



        (p)    “Nonstatutory
Stock Option” means an Option not           intended to qualify as an
Incentive Stock Option.  



        (q)    “Officer” means
a person who is an officer of the           Company within the meaning of Section 16
of the Exchange Act and the rules           and regulations promulgated thereunder.  



        (r)    “Option” means
a stock option granted pursuant to           the Plan.  



        (s)    “Option
Agreement” means a written agreement           between the Company
and an Optionee evidencing the terms and conditions of an           individual Option
grant. Each Option Agreement shall be subject to the terms and           conditions of
the Plan.  



        (t)    “Optionee” means
a person to whom an Option is           granted pursuant to the Plan, or if applicable,
such other person who holds an           outstanding Option.  



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





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        (v)    “Participant” means
a person to whom a Stock           Award is granted pursuant to the Plan or, if
applicable, such other person who           holds an outstanding Stock Award.  



        (w)    “Plan” means
this Scientific Learning Corporation           1999 Equity Incentive Plan.  



        (x)    “Rule 16b-3” means
Rule 16b-3 of the           Exchange Act or any successor to Rule 16b-3, as in
effect when discretion           is being exercised with respect to the Plan.  



        (y)    “Securities
Act” means the Securities Act of           1933, as amended.  



        (z)    “Stock
Appreciation Right” means any of the           various types of
rights which may be granted under Section 8 of the Plan.  



        (aa)    “Stock
Award” means any right granted under the           Plan, including
any Option, any stock bonus, any right to purchase restricted           stock and any
Stock Appreciation Right.  



        (bb)    “Stock
Award Agreement” means a written agreement           between the
Company and a holder of a Stock Award evidencing the terms and           conditions of an
individual Stock Award grant. Each Stock Award Agreement shall           be subject to
the terms and conditions of the Plan.  



        (cc)    “Ten
Percent Stockholder” means a person who owns           (or is deemed
to own pursuant to Section 424(d) of the Code) stock possessing           more than ten
percent (10%) of the total combined voting power of all classes of           stock of the
Company or any of its Affiliates.  



     3.    
          ADMINISTRATION. 



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



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



                        (1)              To
determine from time to time which of the persons eligible under the Plan           shall
be granted Stock Awards; when and how each Stock Award shall be granted;
          whether a Stock Award will be an Incentive Stock Option or a Nonstatutory Stock
          Option, a stock bonus, a right to purchase restricted stock, a Stock
          Appreciation Right or a combination of the foregoing; the provisions of each
          Stock Award granted (which need not be identical), including the time or times
          when a person shall be permitted to receive stock pursuant to a Stock Award;
          whether a person shall be permitted to receive stock upon exercise of an
          Independent Stock Appreciation Right; and the number of shares with respect to
          which a Stock Award shall be granted to each such person.  





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



                        (3)              To
amend the Plan or a Stock Award as provided in Section 13.  



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



        (c)              The
Board may delegate administration of the Plan to a Committee or Committees           of
one or more members of the Board. In the discretion of the Board, a Committee
          may consist solely of two or more Outside Directors, in accordance with Code
          Section 162(m), or solely of two or more Non-Employee Directors, in accordance
          with Rule 16b-3. If administration is delegated to a Committee, the Committee
          shall have, in connection with the administration of the Plan, the powers
          theretofore possessed by the Board (and references in this Plan to the Board
          shall thereafter be to the Committee), subject, however, to such resolutions,
          not inconsistent with the provisions of the Plan, as may be adopted from time
to           time by the Board. The Board may abolish the Committee at any time and
revest in           the Board the administration of the Plan. Notwithstanding anything in
this           Section 3 to the contrary, the Board or the Committee may delegate to a
          committee of one or more members of the Board the authority to grant Options to
          eligible persons who (1) are not then subject to Section 16 of the Exchange Act
          and/or (2) are either (i) not then Covered Employees and are not expected to be
          Covered Employees at the time of recognition of income resulting from such
          Option, or (ii) not persons with respect to whom the Company wishes to comply
          with Section 162(m) of the Code.  





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     4.    
          SHARES SUBJECT TO THE PLAN. 



        (a)              Subject
to the provisions of subsection 12(a) relating to adjustments upon           changes in
stock and subject to Section 4(c) below, the stock that may be issued           pursuant
to Stock Awards shall not exceed in the aggregate Four Million Six           Hundred
Forty Two Thousand Six Hundred Sixty Six (4,642,666) shares of Common           Stock,
less any shares which are subject to Stock Awards granted under the           Company’s
Milestone Equity Incentive Plan, as then in effect. If any Stock           Award shall
for any reason expire or otherwise terminate, in whole or in part,           without
having been exercised in full, the stock not acquired under such Stock           Award
shall revert to and again become available for issuance under the Plan.           Shares
subject to Stock Appreciation Rights exercised in accordance with Section           8 of
the Plan shall not be available for subsequent issuance under the Plan.  



        (b)              The
stock subject to the Plan may be unissued shares or reacquired shares,           bought
on the market or otherwise.  



        (c)              Notwithstanding
any provision herein to the contrary, in the event the Plan is           not approved by
holders of at least two-thirds of the Company’s outstanding           common stock
within twelve months of the date a Stock Award is first granted           hereunder
following the October 2002 amendment of the Plan, then, unless an           exemption
from qualification is available with respect to such grant that does           not
require compliance with the provisions of 260.140.45 of the California Code           of
Regulations, any Stock Award granted hereunder which (i) followed the October
          2002 amendment of the Plan and (ii) was granted at a time when the total number
          of securities issuable upon exercise of all outstanding options [exclusive of
          rights described in Section 260.140.40 and warrants described in Sections
          260.140.43 and 260.140.44 of the California Code of Regulations, and any
          purchase plan or agreement as described in Section 260.140.42 of the California
          Code of Regulations (provided that the purchase plan or agreement provides that
          all securities will have a purchase price of 100% of the fair value, as
          determined in accordance with Section 260.140.50 of the California Code of
          Regulations, of the security either at the time the person is granted the right
          to purchase securities under the plan or agreement or at the time the purchase
          is consummated)] and the total number of securities called for under any bonus
          or similar plan or agreement exceeded 30% of the Company’s then
outstanding           securities, calculated on an as-converted to common stock basis,
shall be void.  



     5.    
          ELIGIBILITY. 



        (a)              Incentive
Stock Options and Stock Appreciation Rights appurtenant thereto may be           granted
only to Employees. Stock Awards other than Incentive Stock Options and           Stock
Appreciation Rights appurtenant thereto may be granted to Employees,           Directors
and Consultants.  



        (b)              No
Ten Percent Stockholder shall be eligible for the grant of an Incentive Stock
          Option unless the exercise price of such Option is at least one hundred ten
          percent (110%) of the Fair Market Value of such stock at the date of grant and
          the Option is not exercisable after the expiration of five (5) years from the
          date of grant.  



        (c)              Subject
to the provisions of Section 12 relating to adjustments upon changes in           stock,
no employee shall be eligible to be granted Options and Stock           Appreciation
Rights covering more than One Million Four Hundred Thousand           (1,400,000) shares
of the Common Stock in any calendar year.  



     6.    
          OPTION PROVISIONS. 



        Each
Option shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The provisions of separate Options need not be identical, but each
Option shall include (through incorporation of provisions hereof by reference in the
Option or otherwise) the substance of each of the following provisions: 



        (a)    Term. No
Incentive Stock Option shall be exercisable after the expiration           of ten (10)
years from the date it was granted.  



        (b)    Price. Subject
to the provisions of Section 5(b) regarding Ten Percent           Stockholders, the
exercise price of each Incentive Stock Option shall be not           less than one
hundred percent (100%) of the Fair Market Value of the stock           subject to the
Option on the date the Option is granted. The exercise price of           each
Nonstatutory Stock Option shall be any price determined by the Board in its
          sole discretion; provided, however, that to the extent the
Company           is subject to Section 260.140.41 of Title 10 of the California Code of
          Regulations at the time the Nonstatutory Stock Option is granted, the exercise
          price of each Nonstatutory Stock Option shall not be less than eighty-five
          percent (85%) of the Fair Market Value of the stock subject to the Option on
the           date the Option is granted, except that a Ten Percent Stockholder shall not
be           granted a Nonstatutory Stock Option unless the exercise price of such Option
is           at least (i) one hundred ten percent (110%) of the Fair Market Value of the
          stock subject to the Option on the date the Option is granted or (ii) such
lower           percentage of the Fair Market Value of the stock subject to the Option on
the           date the Option is granted as is permitted by Section 260.140.41 of Title
10 of           the California Code of Regulations at the time of the grant of the
Option.  





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        (c)    Consideration. The
purchase price of stock acquired pursuant to an Option           shall be paid, to the
extent permitted by applicable statutes and regulations,           either (i) in
cash or (ii) at the discretion of the Board (A) by           delivery to the
Company of other Common Stock of the Company, (B) according           to a deferred
payment (however, payment of the common stock’s “par           value,” as
defined in the Delaware General Corporation Law, shall not be           made by deferred
payment), or other arrangement (which may include, without           limiting the
generality of the foregoing, the use of other Common Stock of the           Company) with
the person to whom the Option is granted or to whom the Option is           transferred
pursuant to subsection 6(d), or (C) in any other form of legal           consideration
that may be acceptable to the Board.  



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



        (d)    Transferability.
An Incentive Stock Option shall not be transferable           except by will or by the
laws of descent and distribution, and shall be           exercisable during the lifetime
of the person to whom the Option is granted only           by such person. A Nonstatutory
Stock Option shall not be transferable except by           will or by the laws of descent
and distribution and, to the extent provided in           the Option Agreement, to such
further extent as permitted by Section           260.140.41(d) of Title 10 of the
California Code of Regulations at the time of           the grant of the Option, and
shall be exercisable during the lifetime of the           Optionee only by the Optionee.
If the Nonstatutory Stock Option does not provide           for transferability, then the
Nonstatutory Stock Option shall not be           transferable except by will or by the
laws of descent and distribution and shall           be exercisable during the lifetime
of the Optionee only by the Optionee.           Notwithstanding the foregoing, the
Optionee may, by delivering written notice to           the Company, in a form
satisfactory to the Company, designate a third party who,           in the event of the
death of the Optionee, shall thereafter be entitled to           exercise the Option.  



        (e)    Vesting. The
total number of shares of stock subject to an Option may,           but need not, be
allotted in periodic installments (which may, but need not, be           equal). The
Option Agreement may provide that from time to time during each of           such
installment periods, the Option may become exercisable (“vest”)           with
respect to some or all of the shares allotted to that period, and may be
          exercised with respect to some or all of the shares allotted to such period
          and/or any prior period as to which the Option became vested but was not fully
          exercised. The Option may be subject to such other terms and conditions on the
          time or times when it may be exercised (which may be based on performance or
          other criteria) as the Board may deem appropriate. The vesting provisions of
          individual Options may vary. The provisions of this subsection 6(e) are subject
          to any Option provisions governing the minimum number of shares as to which an
          Option may be exercised, including the following subsection 6(f).  





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        (f)    Minimum
Vesting. Notwithstanding the foregoing Section 6(e), to the           extent that the
following restrictions on vesting are required by Section           260.140.41(f) of
Title 10 of the California Code of Regulations at the time of           the grant of the
Option, then:  



                        (i)              Options
granted to an Employee who is not an Officer, Director or Consultant           shall
provide for vesting of the total number of shares of Common Stock at a           rate of
at least twenty percent (20%) per year over five (5) years from the date           the
Option was granted, subject to reasonable conditions such as continued
          employment; and  



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



        (g)    Termination
of the Optionee’s Continuous Service. In the event an           Optionee’s
Continuous Service terminates (other than upon the           Optionee’s death or
Disability), the Optionee may exercise his or her           Option (to the extent that
the Optionee was entitled to exercise it at the date           of termination) but only
within such period of time ending on the earlier of (i)           the date three (3)
months after the termination of the Optionee’s           Continuous Service (or such
longer or shorter period specified in the Option           Agreement, which, to the
extent the Company is subject to Section 260.140.41 of           Title 10 of the
California Code of Regulations at the time the Option is           granted, shall not be
less than thirty (30) days), or (ii) the expiration of the           term of the Option
as set forth in the Option Agreement. If, after termination,           the Optionee does
not exercise his or her Option within the time specified in           the Option
Agreement, the Option shall terminate, and the shares covered by such           Option
shall revert to and again become available for issuance under the Plan.  



        An
Optionee’s Option Agreement may also provide that, if the exercise of the Option
following the termination of the Optionee’s Continuous Service (other than upon the
Optionee’s death or Disability) would be prohibited at any time solely because the
issuance of shares would violate the registration requirements under the Securities Act,
then the Option shall terminate on the earlier of (i) the expiration of the term of the
Option as described in subsection 6(a) or (ii) the expiration of a period of three (3)
months after the termination of the Optionee’s Continuous Service during which the
exercise of the Option would not be in violation of such registration requirements (if
such provisions would result in an extension of the time during which the Option may be
exercised beyond the period described in the first paragraph of this subsection 6(g)). 



        (h)    Disability
of Optionee. In the event an Optionee’s Continuous           Service terminates
as a result of the Optionee’s Disability, the Optionee           may exercise his or
her Option (to the extent that the Optionee was entitled to           exercise it at the
date of termination), but only within such period of time           ending on the earlier
of (i) the date twelve (12) months following such           termination (or such longer
or shorter period specified in the Option Agreement,           which, to the extent the
Company is subject to Section 260.140.41 of Title 10 of           the California Code of
Regulations at the time the Option is granted, shall not           be less than six (6)
months), or (ii) the expiration of the term of the Option           as set forth in the
Option Agreement. If, at the date of termination, the           Optionee is not entitled
to exercise his or her entire Option, the shares           covered by the unexercisable
portion of the Option shall revert to and again           become available for issuance
under the Plan. If, after termination, the           Optionee does not exercise his or
her Option within the time specified herein,           the Option shall terminate, and
the shares covered by such Option shall revert           to and again become available
for issuance under the Plan.  





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        (i)    Death
of Optionee. In the event of the death of an Optionee during, or           within a
period specified in the Option after the termination of, the           Optionee’s
Continuous Service, the Option may be exercised (to the extent           the Optionee was
entitled to exercise the Option at the date of death) by the           Optionee’s
estate, by a person who acquired the right to exercise the           Option by bequest or
inheritance or by a person designated to exercise the           option upon the Optionee’s
death pursuant to subsection 6(d), but only           within the period ending on the
earlier of (i) the date eighteen (18) months           following the date of death (or
such longer or shorter period specified in the           Option Agreement, which, to the
extent the Company is subject to Section           260.140.41 of Title 10 of the
California Code of Regulations at the time the           Option is granted, shall not be
less than six (6) months), or (ii) the           expiration of the term of such Option as
set forth in the Option Agreement. If,           at the time of death, the Optionee was
not entitled to exercise his or her           entire Option, the shares covered by the
unexercisable portion of the Option           shall revert to and again become available
for issuance under the Plan. If,           after death, the Option is not exercised
within the time specified herein, the           Option shall terminate, and the shares
covered by such Option shall revert to           and again become available for issuance
under the Plan.  



        (j)    Early
Exercise. The Option may, but need not, include a provision whereby           the
Optionee may elect at any time before the Optionee’s Continuous Service
          terminates to exercise the Option as to any part or all of the shares subject
to           the Option prior to the full vesting of the Option. Any unvested shares so
          purchased may be subject to a repurchase right in favor of the Company or to
any           other restriction the Board determines to be appropriate.  



        (k)    Re-Load
Options. Without in any way limiting the authority of the Board           to make or
not to make grants of Options hereunder, the Board shall have the           authority
(but not an obligation) to include as part of any Option Agreement a           provision
entitling the Optionee to a further Option (a “Re-Load           Option”) in
the event the Optionee exercises the Option evidenced by the           Option Agreement,
in whole or in part, by surrendering other shares of Common           Stock in accordance
with this Plan and the terms and conditions of the Option           Agreement. Any such
Re-Load Option (i) shall be for a number of shares equal to           the number of
shares surrendered as part or all of the exercise price of such           Option; (ii)
shall have an expiration date which is the same as the expiration           date of the
Option the exercise of which gave rise to such Re-Load Option; and           (iii) shall
have an exercise price which is equal to one hundred percent (100%)           of the Fair
Market Value of the Common Stock subject to the Re-Load Option on           the date of
exercise of the original Option. Notwithstanding the foregoing, a           Re-Load
Option which is an Incentive Stock Option and which is granted to a 10%
          stockholder (as described in subsection 5(b)), shall have an exercise price
          which is equal to one hundred ten percent (110%) of the Fair Market Value of
the           stock subject to the Re-Load Option on the date of exercise of the original
          Option and shall have a term which is no longer than five (5) years.  



        Any
such Re-Load Option may be an Incentive Stock Option or a Nonstatutory Stock Option, as
the Board may designate at the time of the grant of the original Option; provided,
however, that the designation of any Re-Load Option as an Incentive Stock Option shall be
subject to the one hundred thousand dollars ($100,000) annual limitation on exercisability
of Incentive Stock Options described in subsection 11(e) of the Plan and in Section 422(d)
of the Code. There shall be no Re-Load Options on a Re-Load Option. Any such Re-Load
Option shall be subject to the availability of sufficient shares under subsection 4(a) and
shall be subject to such other terms and conditions as the Board may determine which are
not inconsistent with the express provisions of the Plan regarding the terms of Options. 





9. 















	




7.     TERMS OF
STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.  



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



        (a)    Purchase
Price. The purchase price under each restricted stock purchase           agreement
shall be such amount as the Board shall determine and designate in           such
agreement, which, to the extent the Company is subject to Section           260.140.42 of
Title 10 of the California Code of Regulations at the time the           restricted Stock
Award is granted, shall be at least eighty-five percent (85%)           of the Fair
Market Value of the stock subject to the agreement, except that for           any Ten
Percent Stockholder, the purchase price shall be at least one hundred           percent
(100%) of the Fair Market Value of the stock subject to the agreement.
          Notwithstanding the foregoing, the Board may determine that eligible
          participants in the Plan may be awarded stock pursuant to a stock bonus
          agreement in consideration for past services actually rendered to the Company
          for its benefit.  



        (b)    Transferability. Rights
under a stock bonus or restricted stock purchase           agreement shall not be
transferable except by will or by the laws of descent and           distribution and
shall be exercisable during the lifetime of the Participant           only by the
Participant.  



        (c)    Consideration. The
purchase price of stock acquired pursuant to a stock           purchase agreement shall
be paid either: (i) in cash; (ii) at the discretion of           the Board, according to
a deferred payment or other arrangement with the person           to whom the stock is
sold; or (iii) in any other form of legal consideration           that may be acceptable
to the Board in its discretion. Notwithstanding the           foregoing, the Board to
which administration of the Plan has been delegated may           award stock pursuant to
a stock bonus agreement in consideration for past           services actually rendered to
the Company or for its benefit.  



        (d)    Vesting. Subject
to the “Repurchase Limitation” in Section           11(g), shares of stock sold
or awarded under the Plan may, but need not, be           subject to a repurchase option
in favor of the Company in accordance with a           vesting schedule to be determined
by the Board.  



        (e)    Termination
of Continuous Service. Subject to the “Repurchase           Limitation” in
Section 11(g), in the event the Stock Award recipient’s           Continuous Service
terminates, the Company may repurchase or otherwise reacquire           any or all of the
shares of stock held by that person which have not vested as           of the date of
termination under the terms of the stock bonus or restricted           stock purchase
agreement between the Company and such person.  





10. 















	





     8.    
          STOCK APPRECIATION RIGHTS. 



        (a)              To
exercise any outstanding Stock Appreciation Right, the holder must provide
          written notice of exercise to the Company in compliance with the provisions of
          the Stock Award Agreement evidencing such right. Except as provided in
          subsection 5(c), no limitation shall exist on the aggregate amount of cash
          payments the Company may make under the Plan in connection with the exercise of
          a Stock Appreciation Right.  



        (b)              Three
types of Stock Appreciation Rights shall be authorized for issuance under           the
Plan:  



                        (1)    Tandem
Stock Appreciation Rights. Tandem Stock Appreciation Rights will           be granted
appurtenant to an Option, and shall, except as specifically set forth           in this
Section 8, be subject to the same terms and conditions applicable to the
          particular Option grant to which it pertains. Tandem Stock Appreciation Rights
          will require the holder to elect between the exercise of the underlying Option
          for shares of stock and the surrender, in whole or in part, of such Option for
          an appreciation distribution. The appreciation distribution payable on the
          exercised Tandem Right shall be in cash (or, if so provided, in an equivalent
          number of shares of stock based on Fair Market Value on the date of the Option
          surrender) in an amount up to the excess of (A) the Fair Market Value (on the
          date of the Option surrender) of the number of shares of stock covered by that
          portion of the surrendered Option in which the Optionee is vested over (B) the
          aggregate exercise price payable for such vested shares.  



                        (2)    Concurrent
Stock Appreciation Rights. Concurrent Rights will be granted           appurtenant to
an Option and may apply to all or any portion of the shares of           stock subject to
the underlying Option and shall, except as specifically set           forth in this
Section 8, be subject to the same terms and conditions applicable           to the
particular Option grant to which it pertains. A Concurrent Right shall be
          exercised automatically at the same time the underlying Option is exercised
with           respect to the particular shares of stock to which the Concurrent Right
          pertains. The appreciation distribution payable on an exercised Concurrent
Right           shall be in cash (or, if so provided, in an equivalent number of shares
of stock           based on Fair Market Value on the date of the exercise of the
Concurrent Right)           in an amount equal to such portion as shall be determined by
the Board or the           Committee at the time of the grant of the excess of (A) the
aggregate Fair           Market Value (on the date of the exercise of the Concurrent
Right) of the vested           shares of stock purchased under the underlying Option
which have Concurrent           Rights appurtenant to them over (B) the aggregate
exercise price paid for such           shares.  



                        (3)    Independent
Stock Appreciation Rights. Independent Rights will be granted           independently
of any Option and shall, except as specifically set forth in this           Section 8, be
subject to the same terms and conditions applicable to           Nonstatutory Stock
Options as set forth in Section 6. They shall be           denominated in share
equivalents. The appreciation distribution payable on the           exercised Independent
Right shall be not greater than an amount equal to the           excess of (A) the
aggregate Fair Market Value (on the date of the exercise of           the Independent
Right) of a number of shares of Company stock equal to the           number of share
equivalents in which the holder is vested under such Independent           Right, and
with respect to which the holder is exercising the Independent Right           on such
date, over (B) the aggregate Fair Market Value (on the date of the grant           of the
Independent Right) of such number of shares of Company stock. The           appreciation
distribution payable on the exercised Independent Right shall be in           cash or, if
so provided, in an equivalent number of shares of stock based on           Fair Market
Value on the date of the exercise of the Independent Right.  





11. 















	




     9.    
          COVENANTS OF THE COMPANY. 



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



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



     10.    
          USE OF PROCEEDS FROM STOCK. 



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



     11.    
          MISCELLANEOUS. 



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



        (b)              Neither
the recipient of a Stock Award nor any person to whom a Stock Award is
          transferred in accordance with the Plan shall be deemed to be the holder of, or
          to have any of the rights of a holder with respect to, any shares subject to
          such Stock Award unless and until such person has satisfied all requirements
for           exercise of the Stock Award pursuant to its terms.  



        (c)              Nothing
in the Plan or any instrument executed or Stock Award granted pursuant           thereto
shall confer upon any recipient or other holder of Stock Awards any           right to
continue in the employ of the Company or any Affiliate or to continue           serving
as a Consultant or a Director, or shall affect the right of the Company           or any
Affiliate to terminate the employment of any Employee with or without           notice
and with or without cause, or the right to terminate the relationship of           any
Consultant pursuant to the terms of such Consultant’s agreement with           the
Company or Affiliate or service as a Director pursuant to the Company’s
          Bylaws and the provisions of the corporate law of the state in which the
Company           is incorporated.  



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





12. 















	




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



        (f)              To
the extent provided by the terms of a Stock Award Agreement, the person to           whom
a Stock Award is granted may satisfy any federal, state or local tax
          withholding obligation relating to the exercise or acquisition of stock under a
          Stock Award by any of the following means (in addition to the Company’s
          right to withhold from any compensation paid to such person by the Company) or
          by a combination of such means: (1) tendering a cash payment; (2) authorizing
          the Company to withhold shares from the shares of the Common Stock otherwise
          issuable to the participant as a result of the exercise or acquisition of stock
          under the Stock Award; or (3) delivering to the Company owned and unencumbered
          shares of the Common Stock of the Company.  



        (g)    Repurchase
Limitation. The terms of any repurchase option shall be           specified in the
Stock Award, and the repurchase price may be either the Fair           Market Value of
the shares of Common Stock on the date of termination of           Continuous Service or
the lower of (i) the Fair Market Value of the shares of           Common Stock on the
date of repurchase or (ii) their original purchase price. To           the extent
required by Section 260.140.41 and Section 260.140.42 of Title 10 of           the
California Code of Regulations at the time a Stock Award is made, any
          repurchase option contained in a Stock Award granted to a person who is not an
          Officer, Director or Consultant shall be upon the terms described below:  



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





13. 















	




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



        (h)    INFORMATION
OBLIGATION. To the extent required by Section 260.140.46 of           Title 10 of the
California Code of Regulations, the Company shall deliver           financial statements
to Participants at least annually. This Section 11(h) shall           not apply to key
Employees whose duties in connection with the Company assure           them access to
equivalent information.  



     12.    
          ADJUSTMENTS UPON CHANGES IN STOCK. 



        (a)              If
any change is made in the stock subject to the Plan, or subject to any Stock
          Award, without the receipt of consideration by the Company (through merger,
          consolidation, reorganization, recapitalization, reincorporation, stock
          dividend, dividend in property other than cash, stock split, liquidating
          dividend, combination of shares, exchange of shares, change in corporate
          structure or other transaction not involving the receipt of consideration by
the           Company), the Plan will be appropriately adjusted in the class(es) and
maximum           number of shares subject to the Plan pursuant to subsection 4(a) and
the maximum           number of shares subject to award to any person during any calendar
year           pursuant to subsection 5(c), and the outstanding Stock Awards will be
          appropriately adjusted in the class(es) and number of shares and price per
share           of stock subject to such outstanding Stock Awards. Such adjustments shall
be           made by the Board, the determination of which shall be final, binding and
          conclusive. (The conversion of any convertible securities of the Company shall
          not be treated as a “transaction not involving the receipt of
consideration           by the Company”.)  



        (b)              In
the event of a proposed dissolution or liquidation of the Company, the Board
          shall notify the Stock Award holder at least fifteen (15) days prior to such
          proposed action. To the extent it has not been previously exercised, the Stock
          Award shall terminate immediately prior to the consummation of such proposed
          action.  





14. 















	




        (c)              In
the event of: (1) a dissolution, liquidation or sale of substantially all of
          the assets of the Company; (2) a merger or consolidation in which the Company
is           not the surviving corporation; or (3) a reverse merger in which the Company
is           the surviving corporation but the shares of Common Stock outstanding
immediately           preceding the merger are converted by virtue of the merger into
other property,           whether in the form of securities, cash or otherwise, then (i) any
          surviving corporation or acquiring corporation shall assume any Stock Awards
          outstanding under the Plan or shall substitute similar stock awards (including
          an award to acquire the same consideration paid to the stockholders in the
          transaction described in this subsection 12(b)) for those outstanding under the
          Plan, or (ii) in the event any surviving corporation or acquiring corporation
          refuses to assume such Stock Awards or to substitute similar stock awards for
          those outstanding under the Plan, (A) with respect to Stock Awards held by
          persons whose Continuous Service has not terminated, the vesting of such Stock
          Awards (and, if applicable, the time during which such Stock Awards may be
          exercised) shall be accelerated prior to such event and the Stock Awards
          terminated if not exercised (if applicable) after such acceleration and at or
          prior to such event, and (B) with respect to any other Stock Awards outstanding
          under the Plan, such Stock Awards shall be terminated if not exercised (if
          applicable) prior to such event.  



        (d)              In
the event of the acquisition by any person, entity or group within the           meaning
of Section 13(d) or 14(d) of the Exchange Act, or any comparable           successor
provisions (excluding any employee benefit plan, or related trust,           sponsored or
maintained by the Company or any Affiliate of the Company) of the           beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the           Exchange Act,
or comparable successor rule) of securities of the Company           representing at
least fifty percent (50%) of the combined voting power entitled           to vote in the
election of directors, then, with respect to Stock Awards held by           persons whose
Continuous Service has not terminated, the vesting of such Stock           Awards (and,
if applicable, the time during which such Stock Awards may be           exercised) shall
be accelerated immediately upon the happening of such event.  



     13.    
          AMENDMENT OF THE PLAN AND STOCK AWARDS. 



        (a)              The
Board at any time, and from time to time, may amend the Plan. However,           except
as provided in Section 12 relating to adjustments upon changes in stock,           no
amendment shall be effective unless approved by the stockholders of the           Company
to the extent stockholder approval is necessary for the Plan to satisfy           the
requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or           securities
exchange listing requirements.  



        (b)              The
Board may in its sole discretion submit any other amendment to the Plan for
          stockholder approval, including, but not limited to, amendments to the Plan
          intended to satisfy the requirements of Section 162(m) of the Code and the
          regulations thereunder regarding the exclusion of performance-based
compensation           from the limit on corporate deductibility of compensation paid to
certain           executive officers.  



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





15. 















	




        (d)              Rights
under any Stock Award granted before amendment of the Plan shall not be
          impaired by any amendment of the Plan unless (i) the Company requests the
          consent of the person to whom the Stock Award was granted and (ii) such person
          consents in writing.  



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



     14.    
          TERMINATION OR SUSPENSION OF THE PLAN. 



        (a)              The
Board may suspend or terminate the Plan at any time. Unless sooner           terminated,
the Plan shall terminate ten (10) years from the date the Plan is           adopted by
the Board or approved by the stockholders of the Company, whichever           is earlier.
No Stock Awards may be granted under the Plan while the Plan is           suspended or
after it is terminated. Notwithstanding the foregoing, all           Incentive Stock
Options shall be granted, if at all, no later than the last day           preceding the
tenth (10th) anniversary of the earlier of (i) the date on which           the latest
increase in the maximum number of shares issuable under the Plan was           approved
by the stockholders of the Company or (ii) the date such amendment was           adopted
by the Board.  



        (b)              Rights
and obligations under any Stock Award granted while the Plan is in effect           shall
not be impaired by suspension or termination of the Plan, except with the
          consent of the person to whom the Stock Award was granted.  



     15.    
          EFFECTIVE DATE OF PLAN. 



        The
Plan shall become effective as of the date of the closing of the IPO, but no Options or
rights to purchase restricted stock granted under the Plan shall be exercised, and no
stock bonuses shall be granted under the Plan, unless and until the Plan has been approved
by the stockholders of the Company, which approval shall be within twelve (12) months
before or after the date the Plan was adopted by the Board. 





16.