VALENCE TECHNOLOGY, INC.

                             2000 STOCK OPTION PLAN

     1.   PURPOSE

     The purpose of the Plan is to further the growth and development of Valence
Technology, Inc., a Delaware corporation (the "Company"), and its Affiliates by
providing appropriate incentives and rewards to Employees (including officers of
the Company), Directors and Consultants who are in a position to contribute
materially to the prosperity of the Company, to increase such persons' interests
in the Company's welfare, to encourage them to continue their services to the
Company or its Affiliates, and to attract individuals of outstanding ability to
enter the employment of the Company or its Affiliates, to remain or become
directors of the Company and to provide valuable services to the Company or its
Affiliates. The Plan offers selected individuals an opportunity to acquire a
proprietary interest in the success of the Company, or to increase such
interest, by purchasing Shares of the Company's Stock.

     2.   INCENTIVE AND NONSTATUTORY STOCK OPTIONS

     Two types of Stock Options (referred to herein as "Options" without
distinction between such two types) may be granted under the Plan: Options
intended to qualify as Incentive Stock Options under Section 422 of the Internal
Revenue Code and Nonstatutory Stock Options not specifically authorized or
qualified for favorable income tax treatment by the Code. All options shall be
separately designated as Incentive Stock Options or Nonstatutory Stock Options
at the time of grant, and in such form as issued pursuant to Section 7, and a
separate certificate or certificates shall be issued for Shares purchased on
exercise of each type of Option. An Option designated as a Nonstatutory Stock
Option shall not be treated as an Incentive Stock Option.

     3.   DEFINITIONS

     The following definitions are applicable to the Plan:

          3.1 "AFFILIATE" shall mean any Parent or any Subsidiary of the
Company.

          3.2 "BOARD" shall mean the Board of Directors of the Company, as
constituted from time to time.

          3.3 "CODE" shall mean the Internal Revenue Code of 1986, as amended
from time to time.

          3.4 "COMMITTEE" shall mean a compensation committee of the Board, as
described in SECTION 4.2.

          3.5 "COMPANY" shall mean Valence Technology, Inc., a Delaware
corporation.

          3.6 "CONSULTANT" shall mean an individual who performs bona fide
services for the Company or an Affiliate as a consultant or advisor, excluding
Employees and Directors.

          3.7 "DIRECTOR" shall mean a member of the Board of the Company.

          3.8 "DISABILITY" shall mean that the Optionee is unable to engage in
any substantial


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gainful activity by reason of any medically determinable physical or mental
impairment. For purposes of determining the term of an ISO pursuant to Section
7.1 hereof, the Disability must be expected to result in death or to have lasted
or be expected to last for a continuous period of not less than 12 months. The
determination of whether an individual has a Disability shall be determined
under procedures established by the Plan Administrator.

          3.9 "EMPLOYEE" shall mean any individual who is a common-law employee
of the Company, a Parent or a Subsidiary.

          3.10 "EXERCISE PRICE" shall mean the amount for which one Share may be
purchased upon exercise of an Option, as specified by the Board of Directors in
the applicable Stock Option Agreement.

          3.11 "FAIR MARKET VALUE" shall mean the fair market value of a Share,
determined as follows:

               3.11.1 If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market, the Fair Market Value of a share of Common Stock shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in the Common Stock) on the last market trading day
prior to the day of determination, as reported in the Wall Street Journal or
such other source as the Plan Administrator deems reliable;

               3.11.2 If the Common Stock is quoted on the Nasdaq System (but
not on the Nasdaq National Market) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a share of Common Stock shall be the mean between the bid and asked prices for
the Common Stock on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Plan Administrator deems reliable;

               3.11.3 In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the Plan
Administrator. Such determination shall be conclusive and binding on all
persons.

          3.12 "INCENTIVE STOCK OPTION" shall mean an Option intended to be and
designated as an employee "incentive stock option" within the meaning of Section
422 of the Code.

          3.13 "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
of 1933 ("Regulation S-K"), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K, and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.

          3.14 "NONSTATUTORY OPTION" shall mean an Option not described in
Sections 422(b) or 423(b) of the Code.


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          3.15 "OPTION" shall mean an Incentive Stock Option or Nonstatutory
Option granted under the Plan and entitling the holder to purchase Shares, which
shall be evidenced by a written agreement between the Company and an Optionee.

          3.16 "OPTIONEE" shall mean an individual who holds an Option.

          3.17 "OUTSIDE DIRECTOR" shall mean a member of the Board who either
(i) is not a current employee of the Company or an Affiliate, is not a former
employee of the Company or an Affiliate receiving compensation for prior
services (other than benefits under a tax qualified pension plan), was not an
officer of the Company or an Affiliate at any time, and is not currently
receiving a direct or indirect remuneration from the Company or an Affiliate for
services in any capacity other than as a Director, or (ii) is otherwise
considered an "outside director" who satisfies the requirements of such term as
defined in Treas. Regs. ss.1.162-27(e)(3).

          3.18 "PARENT" shall mean any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain. A corporation that attains the status of a Parent on
a date after the adoption of the Plan shall be considered a Parent commencing as
of such date.

          3.19 "PLAN" shall mean this Valence Technology, Inc. 2000 Stock Option
Plan, as amended from time to time.

          3.20 "PLAN ADMINISTRATOR" shall mean the Board or the Committee
designated pursuant to SECTION 4.2 hereof to administer, construe and interpret
the terms of the Plan.

          3.21 "SERVICE" shall mean service as an Employee, Director or
Consultant.

          3.22 "SHARE" shall mean one share of Stock, as adjusted in accordance
with Section 8 (if applicable).

          3.23 "STOCK" shall mean the Common Stock of the Company, par value
$0.001 per Share.

          3.24 "STOCK OPTION AGREEMENT" shall mean the agreement between the
Company and an Optionee, which contains the terms, conditions and restrictions
pertaining to the Optionee's Option.

          3.25 "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain. A corporation that attains
the status of a Subsidiary on a date after the adoption of the Plan shall be
considered a Subsidiary commencing as of such date.

     4. ADMINISTRATION

          4.1 ADMINISTRATION BY BOARD. Subject to SECTION 4.2 hereof, the Plan
Administrator shall be the Board of Directors of the Company (the "Board")
during such periods of time as all members of the Board are Outside Directors.
The Plan Administrator shall have authority to


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construe and interpret the Plan, to promulgate, amend, and rescind rules and
regulations relating to its administration, from time to time to select from
among the eligible Employees, Directors and Consultants (as determined pursuant
to Section 6) of the Company and its subsidiaries those persons to whom Options
will be granted, to determine the timing and manner of the grant of the Options,
whether the option will be an Incentive Stock Option or a Nonstatutory Stock
Option, to determine the exercise price, the number of shares covered by and all
of the terms of the Options (which need not be identical), to determine the
duration and purpose of leaves of absence which may be granted to Option holders
without constituting termination of their employment for purposes of the Plan,
and to make all of the determinations necessary or advisable for administration
of the Plan. The Plan Administrator may, in its absolute discretion, without
amendment to the Plan, accelerate the date on which any Option granted under the
Plan becomes exercisable, waive or amend the operation of Plan provisions
respecting exercise after termination of employment or otherwise adjust any of
the terms of such Option. The interpretation and construction by the Plan
Administrator of any provision of the Plan, or of any agreement issued and
executed under the Plan, shall be final and binding upon all parties. No member
of the Board shall be liable for any action or determination undertaken or made
in good faith with respect to the Plan or any agreement executed pursuant to the
Plan.

          4.2 ADMINISTRATION BY COMMITTEE. The Board may, in its sole
discretion, delegate any or all of its duties as Plan Administrator and, subject
to the provisions of Section 4.3 of the Plan, at any time the Board includes any
person who is not an Outside Director, the Board shall delegate all of its
duties as Plan Administrator during such period of time to a Committee of not
fewer than two (2) members of the Board, all of the members of which Committee
shall be persons who, in the opinion of counsel to the Company, are Outside
Directors and Non-Employee Directors, to be appointed by and serve at the
pleasure of the Board. From time to time, the Board may increase or decrease (to
not less than two members) the size of the Committee, and add additional members
to, or remove members from, the Committee. The Committee shall act pursuant to a
majority vote, or the written consent of a majority of its members, and minutes
shall be kept of all of its meetings and copies thereof shall be provided to the
Board. Subject to the provisions of the Plan and the directions of the Board,
the Committee may establish and follow such rules and regulations for the
conduct of its business, as it may deem advisable. No member of the Committee
shall be liable for any action or determination undertaken or made in good faith
with respect to the Plan or any agreement executed pursuant to the Plan.

          4.3 EXCEPTIONS. Anything to the contrary notwithstanding, the
requirements in Sections 2.1 and 2.2 that all members of the Committee be
non-employee directors and Outside Directors shall not apply for any period of
time during which the Company's Common Stock is not registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended, and shall not
apply with respect to grants to employees other than the named executive
officers who are subject to the executive compensation disclosure rules under
the Securities Exchange Act of 1934, as amended. Those provisions of the Plan
that make express reference to Rule 16b-3 under the Securities Exchange Act of
1934, as amended, shall apply only to reporting persons. Whether or not the
Board has delegated administration, the Board shall have the final power to
determine all questions of policy and expediency that may arise in the
administration of the Plan, including the power to amend the Plan as provided in
Section 12.1. The Board may abolish the Committee at any time and revest in the
Board the administration of the Plan.

     5. SHARES SUBJECT TO THE PLAN

          5.1 BASIC LIMITATION. Shares offered under the Plan may be authorized
but unissued Shares or treasury Shares. The aggregate number of Shares that may
be issued under the Plan


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(upon exercise of Options) shall not exceed 2,500,000 Shares, subject to
adjustment pursuant to SECTION 11. The number of Shares that are subject to
Options or other rights outstanding at any time under the Plan shall not exceed
the number of Shares that then remain available for issuance under the Plan. The
Company, during the term of the Plan, shall at all times reserve and keep
available a sufficient number of Shares to satisfy the requirements of the Plan.

          5.2 ADDITIONAL SHARES. In the event that any outstanding Option for
any reason expires or is canceled or otherwise terminated, the Shares allocable
to the unexercised portion of such Option shall again be available for the
purposes of the Plan. In the event that Shares issued under the Plan are
reacquired by the Company pursuant to the terms of any forfeiture provision,
right of repurchase or right of first refusal, such Shares shall again be
available for the purposes of the Plan.

          5.3 LIMIT ON INCENTIVE STOCK OPTIONS. The aggregate Fair Market Value
(determined at the time the Option is granted) of the Shares with respect to
which ISOs granted after 1986 are exercisable for the first time by an Optionee
during any calendar year (under all ISO plans of the Company and its Affiliates)
shall not exceed $100,000. To the extent that the aggregate Fair Market Value
(determined at the time of the Option is granted) of the Shares with respect to
which ISOs are exercisable for the first time by an Optionee during any calendar
year exceeds $100,000, such Options shall be treated as Nonstatutory Options.
The determination of the Options to be treated as Nonstatutory Options shall be
made by taking Options into account in the order in which they were granted.

     6. ELIGIBILITY

          6.1 GENERAL RULE. Incentive Stock Options may be granted only to
Employees (including officers) of the Company or its Affiliates. A Director of
the Company shall not be eligible to receive Incentive Stock Options unless such
director is also an Employee (including an officer) of the Company or any
Affiliate. Nonstatutory Stock Options may be granted only to key Employees
(including officers) of, Directors of or Consultants to the Company or its
Affiliates.

          6.2 INDIVIDUAL LIMIT. Subject to the provisions of SECTION 11 relating
to adjustments upon changes in Stock, no person shall be eligible to be granted
Options covering more than 700,000 Shares of the Company's Stock in any fiscal
year.

          6.3 TEN-PERCENT STOCKHOLDERS. No person shall be eligible for the
grant of an Incentive Stock Option under the Plan if, at the time of grant, such
person owns (or is deemed to own pursuant to Section 424(d) of the Code) stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or of any of the Affiliates 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 term of the Option does
not exceed five (5) years from the date of grant.

     7. OPTION PROVISIONS

     Each Option shall be in such form and shall contain such terms and
conditions as the Plan Administrator 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 Agreement or
otherwise) the substance of each of the following provisions:

          7.1 TERM. The term of any Option shall not be greater than ten (10)
years from the


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date it was granted. An Option shall terminate three (3) months after
termination of the Optionee's Service with the Company or an Affiliate, unless
(i) such termination is due to such person's Disability, in which case the
option may, but need not, provide that it may be exercised at any time within
one (1) year following such termination of Service; or (ii) the Optionee dies
while in the Service of the Company or an Affiliate, or within not more than
three (3) months after termination of such Service, in which case the Option
may, but need not, provide that it may be exercised at any time within eighteen
(18) months following the death of the Optionee by the person or persons to whom
the Optionee's rights under such Option pass by will or by the laws of descent
and distribution; or (iii) the Option by its terms specifies either (a) that it
shall terminate sooner than three (3) months after termination of the Optionee's
Service, or (b) that it may be exercised more than three (3) months after
termination of such Service with the Company or an Affiliate. This Section 7.1
shall not be construed to extend the term of any Option to permit anyone to
exercise the Option after expiration of its term, nor shall it be construed to
increase the number of Shares as to which any Option is exercisable from the
amount exercisable on the date of termination of the Optionee's Service.

          7.2 EXERCISE PRICE. The Exercise Price for the shares subject to any
Option shall be determined by the Plan Administrator at the time of grant, but
shall not be less than par value per share. Anything to the contrary
notwithstanding, the Exercise Price for the shares subject to any Incentive
Stock Option shall not be less than 100% of the Fair Market Value of the shares
of Common Stock of the Company on the date the Stock Option is granted. In the
case of an Incentive Stock Option granted to an employee who owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any Affiliate, the Option price shall not be less than
110% of the fair market value per share of the Stock of the Company on the date
the Option is granted.

          7.3 PAYMENT. The Exercise Price of an Option shall be paid, to the
extent permitted by applicable statutes and regulations, either:

               7.3.1 In cash or check at the time the option is exercised; or

               7.3.2 In the discretion of the Plan Administrator, upon such
terms as the Plan Administrator shall approve, (i) by a copy of instructions to
a broker directing such broker to sell the Shares for which such Option is
exercised, and to remit to the Company the aggregate exercise price of such
Options (a "cashless exercise"), (ii) by paying all or a portion of the Exercise
Price for the number of Shares being purchased by tendering Shares owned by the
Optionee, duly endorsed for transfer to the Company, with a Fair Market Value on
the date of delivery equal to the aggregate purchase price of the Shares with
respect to which such Option or portion thereof is thereby exercised (a
"stock-for-stock exercise"), (iii) by a stock for stock exercise by means of
attestation whereby the Optionee identifies for delivery specific Shares already
owned by Optionee and receives a number of Shares equal to the difference
between the Option Shares thereby exercised and the identified attestation
Shares (an "attestation exercise"), or (iv) with a full-recourse promissory
note. However, the par value of the Shares, if newly issued, shall be paid in
cash or cash equivalents. The Shares shall be pledged as security for payment of
the principal amount of the promissory note and interest thereon. The interest
rate payable under the terms of the promissory note shall not be less than the
minimum rate (if any) required to avoid the imputation of additional interest
under the Code. Subject to the foregoing, the Plan Administrator (at its sole
discretion) shall specify the term, interest rate, amortization requirements (if
any) and other provisions of such note.


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               7.3.3 The Exercise Price shall include payment of the amount of
all federal, state, local or other income, excise or employment taxes subject to
withholding (if any) by the Company or any Affiliate as a result of the exercise
of a Stock Option. At the discretion of the Plan Administrator, upon such terms
as the Plan Administrator shall approve, the Optionee may pay all or a portion
of the tax withholding by (i) cash or check payable to the Company, (ii)
cashless exercise, (iii) stock-for-stock exercise, (iv) by paying all or a
portion of the tax withholding for the number of Shares being purchased by
withholding Shares from any transfer or payment to the Optionee ("stock
withholding"), or (v) a combination of one or more of the foregoing payment
methods. Any Shares issued pursuant to the exercise of an Option and transferred
by the Optionee to the Company for the purpose of satisfying any withholding
obligation shall not again be available for purposes of the Plan and the number
of Shares subject to stock withholding shall not exceed an amount equal to the
minimum required applicable tax withholding rates.

          7.4 RESTRICTIONS ON TRANSFER OF OPTION. Any Incentive Stock Option
shall not be transferable except by will, by the laws of descent and
distribution, and shall be exercisable during the lifetime of the person to whom
the Incentive Stock Option is granted only by such person. A Nonstatutory Stock
Option may be transferred to the extent provided in the Option Agreement;
provided that if the Option Agreement does not expressly permit the transfer of
a Nonstatutory Stock Option, the Nonstatutory Stock Option shall not be
transferable except by will, by the laws of descent and distribution or pursuant
to a domestic relations order satisfying the requirements of Rule 16b-3, and
shall be exercisable during the lifetime of the person to whom the Option is
granted only by such person or any transferee pursuant to a domestic relations
order. Notwithstanding the foregoing, the person to whom the Option is granted
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.

          7.5 EXERCISABILITY. The total number of Shares subject to an option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). 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
was not fully exercised. During the remainder of the term of the Option (if its
term extends beyond the end of the installment periods), the Option may be
exercised from time to time with respect to any Shares then remaining subject to
the Option. The provisions of this SECTION 7.5 are subject to any Option
provisions governing the maximum number of shares as to which an Option may be
exercised. The Option may, but need not, include a provision whereby the
Optionee may elect at any time during the Option term to exercise the Option as
to any part or all of the Shares subject to the Option prior to the stated
vesting date of the Option or of any installment or installments specified in
the Option. Any Shares so purchased from any unvested installment or Option may
be subject to a repurchase right in favor of the Company or to any other
restriction the Plan Administrator determines to be appropriate.

          7.6 SECURITIES LAW REQUIREMENTS. The Company may require any optionee,
or any person to whom an option is transferred under SECTION 7.4, as a condition
of exercising any such option:

               7.6.1 To give written assurances satisfactory to the Company as
to the Optionee'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


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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 option; and

               7.6.2 To give written assurances satisfactory to the Company
stating that such person is acquiring the Stock subject to the Option for such
person's own account and not with any present intention of selling or otherwise
distributing the Stock. These requirements, and any assurances given pursuant to
such requirements, shall be inoperative if:

                    (a) The issuance of the Shares upon the exercise of the
Option has been registered under a then currently effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act");
or

                    (b) 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.

     8. COVENANTS OF THE COMPANY

          8.1 RESERVATION OF SHARES. During the terms of the Options granted
under the Plan, the Company shall keep available at all times the number of
Shares of Stock required to satisfy such Options.

          8.2 RESTRICTION ON ISSUANCE OF SHARES. 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 of Stock upon
exercise of the Options granted under the Plan; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
either the Plan, any Option granted under the Plan or any Stock issued or
issuable pursuant to any such Option. 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 Options unless and until
such authority is obtained.

     9. USE OF PROCEEDS FROM STOCK

     Proceeds from the sale of Stock pursuant to Options granted under the Plan
shall constitute general funds of the Company.

     10. MISCELLANEOUS

          10.1 NO SHAREHOLDER RIGHTS. Neither an Optionee nor any person to whom
an Option is transferred under Section 7.4 shall be deemed to be the holder of,
or to have any of the rights of the holder with respect to, any Shares subject
to such Option unless and until such person has satisfied all requirements for
exercise of the Option pursuant to its terms.

          10.2 FINANCIAL DISCLOSURE. Throughout the term of any Option granted
pursuant to the Plan, the Company shall make available to the holder of such
Option, not later than one hundred twenty (120) days after the close of each of
the Company's fiscal years during the Option term, upon request, such financial
and other information regarding the Company as comprises the annual report to
the stockholders of the Company provided for in the bylaws of the Company.


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          10.3 NO RETENTION RIGHTS. Nothing in the Plan or any instrument
executed or Option granted pursuant thereto shall confer upon any eligible
Employee or Optionee any right to continue in the employ of the Company or any
Affiliate (or to continue acting as a Consultant or Director) or shall affect
the right of the Company or any Affiliate to terminate the Service of any
Optionee with or without cause. In the event that an Optionee is permitted or
otherwise entitled to take a leave of absence, the Company shall have the
unilateral right to (i) determine whether such leave of absence will be treated
as a termination of Service for purposes of SECTION 7.5 hereof and corresponding
provisions of any outstanding Options, and (ii) suspend or otherwise delay the
time or times at which the Shares subject to the Option would otherwise vest.

     11. ADJUSTMENTS UPON CHANGES IN STOCK

          11.1 GENERAL. If any change is made in the Stock subject to the Plan,
or subject to any Option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), then the Plan and
outstanding Options shall be appropriately adjusted:

               11.1.1 In the class(es) and maximum number of Shares subject to
the Plan; and

               11.1.2 In the class(es) and number of Shares and price per Share
of Stock subject to outstanding Options.

          11.2 MERGERS AND CONSOLIDATIONS. In the event of a complete
liquidation of the Company or a merger, reorganization, or consolidation of the
Company with, or upon a sale of all or substantially all of the Company's assets
to, or the acquisition of all or substantially all of the Common Stock of the
Company by any other corporation in which the Company is not the surviving
corporation or the Company becomes a wholly-owned subsidiary of another
corporation, or any other corporate transaction occurs within the meaning of
Code Section 424 and the regulations thereunder that would result in the
transfer to a new employer or discharge of a significant number of employees or
the creation or severance of a parent-subsidiary relationship (a "Corporate
Event"), any unexercised Options theretofore granted under the Plan shall be
deemed cancelled unless the surviving corporation in any such Corporate Event
elects to assume the Options under the Plan or to issue substitute Options in
place thereof; provided, however, that, notwithstanding the foregoing, if such
Options would be cancelled in accordance with the foregoing, the Plan
Administrator shall notify the Optionee in writing or electronically that the
Option shall be fully exercisable for a period of fifteen (15) days from the
date of such notice, and the Option shall terminate upon the expiration of such
period. Alternatively the purchaser(s) in such Corporate Event may, in his, her,
or its discretion, terminate all outstanding Options by delivering to the
Optionees the same kind of consideration that is delivered to the stockholders
of the Company as a result of such Corporate Event, or the Board may terminate
all outstanding Options in exchange for consideration in cash or in kind, which
consideration in both cases shall be equal in value to the higher of (i) the
Fair Market Value of those Shares of Stock or other securities the holder of
such Option would have received had the Option been exercised and no disposition
of the Shares acquired upon such exercise been made prior to such Corporate
Event, less the exercise price therefor, and (ii) the Fair Market Value of those
Shares of Stock or other securities the holder of the Option would have received
had the Option been exercised and no disposition of the Shares acquired upon
such exercise been made immediately following such Corporate Event, less the
exercise price therefor.

     12. AMENDMENT OF THE PLAN


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          12.1 RIGHT TO AMEND OR TERMINATE THE PLAN. The Board may amend,
suspend or terminate the Plan at any time and for any reason; provided, however,
that any amendment of the Plan which increases the number of Shares available
for issuance under the Plan (except as provided in SECTION 11), extends the term
beyond ten (10) years after the earlier of the date the Plan is adopted or the
date the Plan is approved by the Company's shareholders, or which materially
changes the class of persons who are eligible for the grant of ISOs, shall be
subject to the approval of the Company's stockholders. Stockholder approval
shall not be required for any other amendment of the Plan, except to the extent
stockholder approval is necessary for the Plan to satisfy the requirements of
Rule 16b-3 under the Exchange Act or any Nasdaq or securities exchange listing
requirements.

          12.2 MODIFICATION, EXTENSION, AND RENEWAL OF OPTIONS. Subject to the
terms and conditions and within the limitations of the Plan, the Plan
Administrator may modify, extend, or renew outstanding Options granted under the
Plan, and accept the surrender of outstanding Options (to the extent not
theretofore exercised). The Plan Administrator shall not, however, modify any
outstanding Incentive Stock Option in any manner that would cause the Option not
to qualify as an Incentive Stock Option within the meaning of Section 422 of the
Code. Notwithstanding the foregoing, no modification of an Option shall, without
the consent of the Optionee, alter or impair any rights of the Optionee under
the Option. However, a termination of the Option in which the Optionee receives
a cash payment equal to the difference between the Fair Market Value and the
exercise price for all shares subject to exercise under any outstanding Option
shall not alter or impair any rights of the Optionee.

     13. EFFECTIVE DATE AND TERM OF PLAN

          13.1 EFFECTIVE DATE. The Plan, as set forth herein, shall be effective
as of January 3, 2000 (the "Effective Date", which is the date of its adoption
by the Board of Directors), subject to the approval of the Company's
stockholders. In the event that the stockholders fail to approve the Plan within
12 months after its adoption by the Board of Directors, any grants of Options or
sales or awards of Shares that have already occurred shall be rescinded, and no
additional grants, sales or awards shall be made thereafter under the Plan.

          13.2 TERMINATION DATE. The Plan shall terminate automatically on
January 3, 2010 and may be terminated on any earlier date pursuant to SECTION
12.1 above.

     14. EXECUTION.

To record the adoption of the Plan by the Board of Directors, the Company has
caused its authorized officer to execute the same as of January 3, 2000.