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                                                                    Exhibit 10.4


                                 PETSMART, INC.

                           1997 EQUITY INCENTIVE PLAN

            ADOPTED BY THE BOARD OF DIRECTORS EFFECTIVE MAY 22, 1997

  AMENDED BY THE BOARD OF DIRECTORS ON SEPTEMBER 29, 1998, SEPTEMBER 30, 1999,
      MARCH 28, 2001, MARCH 26, 2002, DECEMBER 10, 2002 AND MARCH 25, 2003

1.    PURPOSES.

      (a)   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) Nonstatutory
Stock Options; (ii) stock bonuses; and (iii) rights to receive or to purchase
restricted stock.

      (b)   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.

      (c)   The Company intends that, subject to the provisions of the Plan, the
type and the amount of all Stock Awards issued under the Plan shall be 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).

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, or such other parent corporation or
subsidiary corporation designated by the Board.

      (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)   "COMMON STOCK" means the common stock of the Company.

      (f)   "COMPANY" means PETsMART, Inc., a Delaware corporation.

      (g)   "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 a Director.
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      (h)   "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means the
service relationship, whether as an Employee, Director or a Consultant, is not
interrupted or terminated. The Board, in its sole discretion, may determine
whether Continuous Status as an Employee, Director or Consultant shall be
considered interrupted in the case of: (i) any leave of absence approved by the
Board, including sick leave, military leave, or any other personal leave; or
(ii) transfers between locations of the Company or between the Company,
Affiliates or their successors.

      (i)   "DIRECTOR" means a member of the Board.

      (j)   "DISABILITY" means that an individual is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or which has lasted
for a sufficiently long period of time for the individual to be eligible under
the Company's policy of long-term disability insurance.

      (k)   "DISINTERESTED DIRECTOR" means a Director who satisfies the
requirements of Rule 16b-3(b)(3) or any other applicable rules, regulations or
interpretations of the Securities and Exchange Commission.

      (l)   "EMPLOYEE" means any person 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.

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

      (n)   "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock of the Company determined as follows:

            (i)   If the Common Stock is listed on any established stock
exchange or traded on the NASDAQ National Market or the NASDAQ SmallCap Market,
the Fair Market Value of a Share shall be the closing sales price for such Share
(or the closing bid, if no sales were reported) as quoted on such exchange or
market (or the exchange or market 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 Board deems
reliable.

            (ii)  In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.

      (o)   "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an incentive stock option pursuant to Section 422 of the Code and the
regulations promulgated thereunder.

      (p)   "NON-EMPLOYEE DIRECTOR" means a director of the Company who is not
also an Employee.

      (q)   "OFFICER" means a person who is an officer of the Company for
purposes of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.


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      (r)   "OPTION" means a Nonstatutory 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.

      (u)   "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.

      (v)   "PLAN" means this PETsMART, Inc. 1997 Equity Incentive Plan.

      (w)   "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.

      (x)   "SHARE" means a share of Common Stock of the Company.

      (y)   "STOCK AWARD" means any right granted under the Plan, including any
Option, any stock bonus and any right to purchase restricted stock.

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

      (aa)  "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.

3.    ADMINISTRATION.

      (a)   The Plan shall be administered by the Board 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:

            (i)   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 Option, a stock bonus, a
right to receive or to purchase restricted stock 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 Shares pursuant to a Stock Award and the number of Shares with respect
to which a Stock Award shall be granted to each such person.

            (ii)  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.


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

            (iv)  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
composed of not fewer than two (2) members ("Committee"), all of the members of
which Committee shall be Disinterested Directors. 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 Stock Awards to eligible persons who are not then subject to Section 16 of
the Exchange Act.

      (d)   Any requirement that an administrator of the Plan be a Disinterested
Director shall not apply if the Board or the Committee expressly declares that
such requirement shall not apply.

4.    SHARES SUBJECT TO THE PLAN.

      (a)   Subject to the provisions of Section 12 relating to adjustments upon
changes in the Common Stock, the Shares that may be issued pursuant to Stock
Awards shall not exceed in the aggregate Nine Million Seven Hundred Fifty
Thousand (9,750,000) Shares. If any Stock Award shall for any reason expire or
otherwise terminate, in whole or in part, without having been exercised in full,
or if any shares of Common Stock issued to a Participant pursuant to a Stock
Award are forfeited back to the Company because of the failure to meet a
contingency or condition required to vest such shares in the Participant, the
Shares which either: (i) are not acquired under such Stock Award; or (ii) are
forfeited shall revert to and again become available for issuance under the
Plan. Also, any Shares reacquired by the Company pursuant to subsection 11(d) or
as consideration for the exercise of an Option shall again become available for
issuance under the Plan.

      (b)   Shares from the exercise or grant of Stock Awards shall not be
issued to Officers and Directors in an amount which exceeds the lesser of: (i)
40% of the shares reserved under the Plan in Section 4(a) above; and (ii) 40% of
the grants of Stock Awards made under the Plan. Stock Awards granted to Officers
not previously employed by the Company as an inducement essential to such
Officer's acceptance of employment with the Company shall not be counted toward
the limits of this subsection 4(b).

      (c)   The Shares subject to the Plan may be unissued Shares or reacquired
Shares bought on the market or otherwise.


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5.    ELIGIBILITY.

      (a)   Stock Awards may be granted to Employees, Directors or Consultants.

      (b)   A Director shall in no event be eligible for the benefits of the
Plan unless at the time discretion is exercised in the selection of the Director
as a person to whom Stock Awards may be granted, or in the determination of the
number of shares which may be covered by Stock Awards granted to the Director:
(i) the Board has delegated its discretionary authority over the Plan to a
Committee which consists solely of Disinterested Directors; or (ii) the Plan
otherwise complies with the requirements of Rule 16b-3. The Board shall
otherwise comply with the requirements of Rule 16b-3. This subsection 5(b) shall
not apply if the Board or Committee expressly declares that it shall not apply.

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 Option shall be exercisable after the expiration of ten
(10) years from the date it was granted or such longer or shorter term as may be
provided in the Option Agreement.

      (b)   PRICE. The exercise price of each 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.

      (c)   CONSIDERATION. The consideration to be paid for the Shares to be
issued upon exercise of an Option, including the method of payment, shall be
determined by the Board and may consist entirely of: (i) cash or check; (ii)
promissory note (except that payment of the Share's "par value," as defined in
the Delaware General Corporation Law, shall not be made by deferred payment);
(iii) other Shares having a fair market value on the date of surrender equal to
the aggregate exercise price of the Shares as to which the Option shall be
exercised, including by delivering to the Company an attestation of ownership of
owned and unencumbered Shares in a form approved by the Company; (iv) payment
pursuant to a program developed under Regulation T as promulgated by the Federal
Reserve Board which, prior to the issuance of the Shares, results in either the
receipt of cash (or check) by the Company or the receipt of irrevocable
instructions to pay the aggregate exercise price to the Company from the sales
proceeds; (v) any combination of such methods of payment; or (vi) such other
consideration and method of payment for the issuance of Shares to the extent
permitted under applicable law. In making its determination as to the type of
consideration to accept, the Board shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company. In the case of
any deferred payment arrangement, interest shall be payable 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.


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      (d)   TRANSFERABILITY. An 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 an Option, the 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. 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.

      (e)   VESTING. 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). 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.

      (f)   TERMINATION OF EMPLOYMENT, DIRECTORSHIP OR CONSULTING RELATIONSHIP.

            (i)   In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option within such period of
time designated by the Board, which shall in no event be later than the
expiration of the term of the Option as set forth in the Option Agreement (the
"Post-Termination Exercise Period"), and only to the extent that the Optionee
was entitled to exercise the Option on the date the Optionee's Continuous Status
as an Employee, Director or Consultant terminates. The Board may at any time
extend the Post-Termination Exercise Period and may provide for continued
vesting during such extended period. If, as of 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 the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified in the Option Agreement or as otherwise determined above, the
Option shall terminate, and the Shares covered by such Option shall revert to
and again become available for issuance under the Plan. Notwithstanding the
foregoing, the Board shall have the power to permit an Option to vest, in whole
or in part, during the Post-Termination Exercise Period.

            (ii)  An Optionee's Option Agreement may also provide that if the
exercise of the Option following the termination of the Optionee's Continuous
Status as an Employee, Director or Consultant (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 set forth in the first paragraph of this subsection 6(f); or
(ii) the expiration of a period of three (3) months after the termination of the
Optionee's Continuous Status as an Employee, Director or Consultant during which
the exercise of the Option would not be in violation of such registration
requirements.


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      (g)   DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Status
as an Employee, Director or Consultant 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 as of 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); 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.

      (h)   DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a period specified in the Option Agreement after the termination of,
the Optionee's Continuous Status as an Employee, Director or Consultant, the
Option may be exercised (to the extent the Optionee was entitled to exercise the
Option as of 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); 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.

      (i)   EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant 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.

      (j)   RE-LOAD OPTIONS.

            (i)   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 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 Shares
subject to the Re-Load Option on the date of exercise of the original Option.


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            (ii)  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.

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

      Each stock bonus agreement or restricted stock 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 agreements or restricted
stock agreements may change from time to time, and the terms and conditions of
separate agreements need not be identical, but each stock bonus agreement or
restricted stock 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, if any, under each stock bonus
agreement or restricted stock agreement shall be such amount as the Board shall
determine and designate in such agreement. Notwithstanding the foregoing, the
Board may determine that eligible participants in the Plan may be awarded stock
pursuant to a stock bonus agreement or restricted stock agreement in
consideration for past services actually rendered to the Company or for its
benefit.

      (b)   TRANSFERABILITY. No rights under a stock bonus agreement or
restricted stock agreement shall be transferable except by will or the laws of
descent and distribution, so long as stock awarded under such agreement remains
subject to the terms of any restrictive covenant (such as a repurchase option or
reacquisition option) in favor of the Company.

      (c)   CONSIDERATION. The purchase price, if any, of Shares acquired
pursuant to a stock bonus agreement or restricted stock agreement shall be paid
either: (i) in cash at the time of purchase; (ii) at the discretion of the
Board, according to a deferred payment or other arrangement with the person to
whom the Shares are sold, except that payment of the common stock's "par value"
(as defined in the Delaware General Corporation Law) shall not be made by
deferred payment; or (iii) in any other form of legal consideration, including
past services actually rendered to the Company or for its benefit, that may be
acceptable to the Board in its discretion.

      (d)   VESTING. Shares sold or awarded under this Section 7 may, but need
not, be subject to a repurchase option or reacquisition option in favor of the
Company in accordance with a vesting schedule to be determined by the Board.

      (e)   TERMINATION OF CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR
CONSULTANT. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire any or all of the Shares held by that person which have not vested as
of the date of termination under the terms of the stock bonus agreement or
restricted stock agreement between the Company and such person.


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8.    CANCELLATION AND RE-GRANT OF OPTIONS.

      The Board shall have the authority to effect, at any time and from time to
time: (i) the repricing of any outstanding Options under the Plan; and/or (ii)
with the consent of any adversely affected holders of Options, the cancellation
of any outstanding Options under the Plan and the grant in substitution therefor
of new Options under the Plan covering the same or different numbers of Shares,
but having an exercise price per share not less than one hundred percent (100%)
of the Fair Market Value per share of stock on the new grant date.

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 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
either the Plan, any Stock Award or any Shares 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 Shares under
the Plan, the Company shall be relieved from any liability for failure to issue
and sell Shares upon exercise of such Stock Awards unless and until such
authority is obtained.

10.   PAYMENT OF FEES IN COMMON STOCK.

      (a)   A Non-Employee Director may elect to receive payment of any of his
or her director fees, including the annual retainer, chairperson fee, lead
director fee and meeting attendance fees (the "Director's Fees") from the
Company in the form of Common Stock (the "Election"). The Board may provide
rules with respect to Elections including, but not limited to, irrevocable
elections, timing of such elections and revocability of elections. The Board may
also set other rules with respect to the payment of Director's Fees in the form
of Common Stock, including the method of calculating the number of shares of
Common Stock to be issued and the timing for delivery of such shares. In the
absence of any subsequent determination by the Board, the number of shares of
Common Stock to be paid to a Non-Employee Director upon an Election shall be
determined by dividing the amount of each fee payable by the Fair Market Value
of the Common Stock on the date such fees were earned, and the amount of any
fractional share shall be paid in cash.

      (b)   A Non-Employee Director may elect to defer payment of any Director's
Fees from the Company that are payable in the form of Common Stock to a date
specified by the Non-Employee Director that is on or after termination of the
Non-Employee Director's Continuous Status as an Employee, Director or
Consultant. An election to defer Director's Fees shall be made pursuant to the
rules, if any, provided for by the Board.

      (c)   If a Non-Employee Director has elected to receive his or her fees in
the form of Common Stock, a certificate (or the equivalent thereof) for the
number of shares of Common Stock to which the Non-Employee Director is entitled
shall be issued as soon as reasonably


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practicable following the date (deferred or current) the director is to receive
the fee. Prior to issuance, shares of Common Stock subject to a Non-Employee
Director's deferral election shall be maintained as a bookkeeping entry only.

11.   MISCELLANEOUS.

      (a)   No Employee, Director, or Consultant or any person to whom an Option
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 Option unless and until such person has satisfied all requirements for
exercise of the Option pursuant to its terms.

      (b)   Nothing in the Plan or any instrument executed, or Stock Award
granted pursuant thereto, shall confer upon any Participant any right to
continue to serve the Company or any Affiliate in the capacity in effect at the
time the Stock Award was granted or shall affect the right of the Company or any
Affiliate to terminate: (i) the employment of any Employee with or without
notice and with or without cause; (ii) the service of a Consultant pursuant to
the terms of such Consultant's agreement with the Company or Affiliate; or (iii)
the service of a Director pursuant to the Bylaws of the Company or an Affiliate,
and any applicable provisions of the corporate law of the state in which the
Company or the Affiliate is incorporated, as the case may be.

      (c)   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 Shares under any Stock Award: (i) 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 associated with the Stock Award; and (ii)
to give written assurances satisfactory to the Company stating that such person
is acquiring the Shares subject to the Stock Award for such person's own account
and not with any present intention of selling or otherwise distributing the
Shares. 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 Shares 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 Shares.

      (d)   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 Shares
under a Stock Award by any of the following means or by a combination of such
means: (i) tendering a cash payment; (ii) authorizing the Company to withhold
Shares from the Shares otherwise issuable to the Participant as a result of the
exercise or acquisition of Shares under the Stock Award; or (iii) delivering to
the Company


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owned and unencumbered Shares, including by delivering to the Company an
attestation of ownership of owned and unencumbered Shares in a form approved by
the Company.

      (e)   Proceeds from the sale of Shares pursuant to Stock Awards shall
constitute general funds of the Company.

12.   ADJUSTMENTS UPON CHANGES IN STOCK.

      (a)   If any change is made in the Shares 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
outstanding Stock Awards will be appropriately adjusted in the class(es) and
number of Shares and price per Share 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 Corporate Transaction (as defined in subsection
12(d) below): (i) any surviving or acquiring corporation shall assume Stock
Awards outstanding under the Plan or shall substitute similar Stock Awards for
those outstanding under the Plan; or (ii) such Stock Awards shall continue in
full force and effect. In the event any surviving 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 then performing services as Employees, Directors or Consultants, the
vesting of such Stock Awards and 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 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 prior to such
event.

      (c)   Notwithstanding any other provision of this Plan, with respect to
any Covered Service Provider, if such Covered Service Provider's continuous
service with the Company or an Affiliated Entity is terminated by a Covered
Termination within eighteen (18) months following the date of the Change in
Control, then any Stock Awards held by such Covered Service Provider shall
immediately become fully vested and exercisable, and any repurchase right by the
Company or any Affiliated Entity with respect to any Shares of stock covered by
such Stock Awards shall immediately lapse.

      For purposes of this subsection 12(c), "Affiliated Entity" means any
parent corporation or subsidiary corporation of the Company, whether now or
hereafter existing, as those terms are defined in Sections 424(e) and (f)
respectively, of the Code.

      For purposes of this subsection 12(c), "Change in Control" means: (i) a
dissolution or liquidation of the Company; (ii) a sale of all or substantially
all of the assets of the Company;


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<PAGE>
(iii) a merger or consolidation in which the Company is not the surviving
corporation and in which beneficial ownership of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors has changed; (iv) 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, and in which beneficial ownership of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of Directors has changed; (v) an 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
subsidiary of the Company or other entity controlled by 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; or (vi) in the event that the individuals
who, as of the date of the adoption of this provision, are members of the
Company's Board of Directors (the "Incumbent Board"), cease for any reason to
constitute at least fifty percent (50%) of the Board of Directors. (If the
election, or nomination for election by the Company's stockholders, of any new
director is approved by a vote of at least fifty percent (50%) of the Incumbent
Board, such new Director shall be considered as a member of the Incumbent
Board).

      For purposes of this subsection 12(c), "Covered Service Provider" means
all employees of the Company or an Affiliated Entity, members of the Board of
Directors of the Company or an Affiliated Entity, and selected consultants
providing significant services to the Company or an Affiliated Entity as of the
occurrence of a transaction or event constituting a Change in Control.

      For purposes of this subsection 12(c), "Covered Termination" means either
an involuntary termination without "Cause" or a " Constructive Termination."

      For purposes of this subsection 12(c) only, "Cause" means the occurrence
of any of the following (and only the following): (i) conviction of the Covered
Service Provider of any felony involving fraud or act of dishonesty against the
Company or any Affiliated Entity; (ii) conduct by the Covered Service Provider
which, based upon good faith and reasonable factual investigation and
determination of the Company (or, if the Covered Service Provider is a named
executive officer as defined in Item 402(a)(3) of Regulation S-K promulgated by
the Securities and Exchange Commission, of the Board of Directors of the
Company), demonstrates gross unfitness to serve; or (iii) intentional, material
violation by the Covered Service Provider to the Company or any Affiliated
Entity, provided that in the event that any of the foregoing events is capable
of being cured, the Company shall provide written notice to the Covered Service
Provider describing the nature of such event and the Covered Service Provider
shall thereafter have thirty (30) days to cure such event. In addition, if the
Covered Service Provider is not a corporate officer of the Company (i.e., an
Employee not holding the title of Vice President or higher), "Cause" shall also
include poor performance of the Covered Service Provider's services for the
Company or any Affiliated Entity as determined by the Company following: (A)
written notice to the Covered Service Provider describing the nature of such
deficiency; and (B) the Covered Service Provider's failure to cure such
deficiency within thirty (30) days following receipt of such written notice.


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<PAGE>
      For purposes of this subsection 12(c), "Constructive Termination" means
that a Covered Service Provider who is a corporate officer of the Company (i.e.,
an Employee holding the title of Vice President or higher) voluntarily
terminates his or her service after any of the following are undertaken without
the Covered Service Provider's express written consent: (i) the assignment to
the Covered Service Provider of any duties or responsibilities which result in
any diminution or adverse change of the Covered Service Provider's position,
responsibility, authority, status, circumstances or scope of service as in
effect immediately prior to a Change in Control of the Company, or a change in
the Covered Service Provider's titles or offices as in effect immediately prior
to a Change in Control of the Company, or any removal of the Covered Service
Provider from or any failure to re-elect the Covered Service Provider to any of
such positions, except in connection with the termination of the Covered Service
Provider's service on account of death, disability, retirement, for Cause, or
any voluntary termination of service by the Covered Service Provider other than
Constructive Termination; (ii) a reduction by the Company in the Covered Service
Provider's annual base compensation; (iii) any failure by the Company to
continue in effect any benefit plan or arrangement, including incentive plans or
plans to receive securities of the Company, in which the Covered Service
Provider is participating at the time of a Change in Control of the Company
(hereinafter referred to as "Benefit Plans"), or the taking of any action by the
Company which would adversely affect the Covered Service Provider's
participation in or reduce the Covered Service Provider's benefits under any
Benefit Plans or deprive the Covered Service Provider of any fringe benefit
enjoyed by the Covered Service Provider at the time of a Change in Control of
the Company, provided, however, that the Covered Service Provider may not incur
a Constructive Termination following a Change in Control of the Company if the
Company offers a range of benefit plans and programs which, taken as a whole,
are comparable to the Benefit Plans; (iv) a relocation of the Covered Service
Provider or the Company's offices to a location more than twenty-five (25) miles
from the location at which the Covered Service Provider performed his or her
duties prior to a Change in Control of the Company, except for required travel
by the Covered Service Provider on the Company's or any Affiliated Entity's
business to an extent substantially consistent with the Covered Service
Provider's business travel obligations at the time of a Change in Control of the
Company; (v) any breach by the Company of any provision of this agreement; or
(vi) any failure by the Company to obtain the assumption of this agreement by
any successor or assign of the Company.

      (d)   For purposes of this Plan, "Corporate Transaction" means: (1) a
dissolution, liquidation, or sale of all or 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 Shares outstanding immediately preceding the merger
are converted by virtue of the merger into other property, whether in the form
of securities, cash or otherwise.

13.   AMENDMENT OF THE PLAN AND STOCK AWARDS.

      (a)   The Board at any time, and from time to time, may amend the Plan.

      (b)   The Board, in its sole discretion, may submit the Plan and/or any
amendment to the Plan for stockholder approval.


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<PAGE>
      (c)   It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide those eligible
with the maximum benefits provided or to be provided under the provisions of the
Code and the regulations promulgated thereunder.

      (d)   Rights and obligations 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 and obligations
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.

      (f)   The Board may amend the terms of any Stock Award (including, without
limitation, by amending the Change in Control and Severance Benefit Plan)
without approval by the stockholders of the Company: (i) to extend the period
for exercise of an Option pursuant to subsection 6(f), 6(g) or 6(h), provided
that in no case shall such period extend beyond the term of the Option as set
forth in the Option Agreement; or (ii) 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 pursuant to subsection 6(e) or 7(d) or Section 12.

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 when all Shares reserved for
issuance under the Plan have been issued and all such issued Shares are no
longer subject to a repurchase option or a reacquisition option in favor of the
Company. No Stock Awards may be granted under the Plan while the Plan is
suspended or after it is terminated.

      (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 written consent of the person to whom the Stock Award was
granted.

15.   EFFECTIVE DATE OF PLAN.

      The Plan shall become effective on May 22, 1997.


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