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                                                                     EXHIBIT 4.1

                                 ENDOLOGIX, INC.
                      1996 STOCK OPTION/STOCK ISSUANCE PLAN
                 (AS AMENDED AND RESTATED THROUGH JANUARY 2005)

                                  ARTICLE ONE
                               GENERAL PROVISIONS

      I. PURPOSE OF THE PLAN

      This 1996 Stock Option/Stock Issuance Plan is intended to promote the
interests of Endologix, Inc., a Delaware corporation, by providing eligible
persons with the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Corporation as an incentive for them
to remain in the service of the Corporation.

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

      II. STRUCTURE OF THE PLAN

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

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

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

                        (iii) the Automatic Option Grant Program under which
            eligible non-employee Board members shall automatically receive
            option grants at periodic intervals to purchase shares of Common
            Stock.

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

      III. ADMINISTRATION OF THE PLAN

            A. The Primary Committee shall have sole and exclusive authority to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders.

            B. Administration of the Discretionary Option Grant and Stock
Issuance Programs with respect to all other persons eligible to participate in
those programs may, at the Board's discretion, be vested in the Primary
Committee or a Secondary Committee, or the Board may retain the power to
administer those programs with respect to all such persons.

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

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            D. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority to
establish such rules and regulations as it may deem appropriate for proper
administration of the Discretionary Option Grant and Stock Issuance Programs and
to make such determinations under, and issue such interpretations of, the
provisions of such programs and any outstanding options or stock issuances
thereunder as it may deem necessary or advisable. Decisions of the Plan
Administrator within the scope of its administrative functions under the Plan
shall be final and binding on all parties who have an interest in the
Discretionary Option Grant or Stock Issuance Program under its jurisdiction or
any option or stock issuance thereunder.

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

            F. Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the terms of that program, and no Plan
Administrator shall exercise any discretionary functions with respect to option
grants or stock issuances made thereunder.

      IV. ELIGIBILITY

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

                        (i) Employees,

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

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

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

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

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            D. The individuals eligible to participate in the Automatic Option
Grant Program shall be limited to (i) those individuals who are serving as
non-employee Board members on the Underwriting Date, (ii) those individuals who
first become non-employee Board members after the Underwriting Date, whether
through appointment by the Board or election by the Corporation's stockholders,
and (iii) those individuals who are to continue to serve as non-employee Board
members after one or more Annual Stockholders Meetings held after the
Underwriting Date. A non-employee Board member who has previously been in the
employ of the Corporation (or any Parent or Subsidiary) shall not be eligible to
receive an initial option grant under the Automatic Option Grant Program on the
Underwriting Date or (if later) at the time he or she first becomes a
non-employee Board member, but such individual shall be eligible to receive
periodic option grants under the Automatic Option Grant Program upon his or her
continued service as a non-employee Board member after one or more Annual
Stockholders Meetings.

      V. STOCK SUBJECT TO THE PLAN

            A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
which may be issued over the term of the Plan shall not exceed 5,450,000 shares.
Such authorized share reserve is comprised of (i) the number of shares which
remained available for issuance, as of the Plan Effective Date, under the
Predecessor Plan as last approved by the Corporation's stockholders, including
the shares subject to the outstanding options to be incorporated into the Plan
and (ii) additional increases approved by the Board and stockholders of the
Corporation.

            B. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 800,000 shares of Common Stock in the aggregate over the term of the
Plan.

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

            D. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and/or class of

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securities issuable under the Plan, (ii) the number and/or class of securities
for which any one person may be granted options, separately exercisable stock
appreciation rights and direct stock issuances in the aggregate under the Plan,
(iii) the number and/or class of securities for which automatic option grants
are to be made subsequently per Eligible Director under the Automatic Option
Grant Program and (iv) the number and/or class of securities and the exercise
price per share in effect under each outstanding option (including any option
incorporated from the Predecessor Plan). Such adjustments to the outstanding
options are to be effected in a manner which shall preclude the dilution or
enlargement of benefits under such options. The adjustments determined by the
Plan Administrator shall be final, binding and conclusive.

                                  ARTICLE TWO
                       DISCRETIONARY OPTION GRANT PROGRAM

      I. OPTION TERMS

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

            A. EXERCISE PRICE.

                  1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the option grant date.

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

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

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

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

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

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

            C. EFFECT OF TERMINATION OF SERVICE.

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

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

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

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

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

                        (v) In the event of an Involuntary Termination following
            a Corporate Transaction, the provisions of Section III of this
            Article Two shall govern the period for which the outstanding
            options are to remain exercisable following the Optionee's cessation
            of Service and shall supersede any provisions to the contrary in
            this section.

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

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

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

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

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

            F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, the option shall be exercisable only by the Optionee and shall not be
assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee's death. However, a Non-Statutory Option may
be assigned in whole or in part during the Optionee's lifetime in accordance
with the terms of a Qualified Domestic Relations Order. The assigned portion may
only be exercised by the person or persons who acquire a proprietary interest in
the option pursuant to such Qualified Domestic Relations Order. The terms
applicable to the assigned portion shall be the same as those in effect for the
option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Plan Administrator may deem appropriate.

      II. INCENTIVE OPTIONS

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

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

            B. EXERCISE PRICE. The exercise price per share shall not be less
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.

            C. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares
of Common Stock (determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the Plan (or any other
option plan of the Corporation or any Parent or Subsidiary) may for the first
time become exercisable as Incentive Options during any one (1) calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the

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same calendar year, the foregoing limitation on the exercisability of such
options as Incentive Options shall be applied on the basis of the order in which
such options are granted.

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

      III. CORPORATE TRANSACTION/CHANGE IN CONTROL

            A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. However, an outstanding option shall not so accelerate
if and to the extent: (i) such option is, in connection with the Corporate
Transaction, either to be assumed by the successor corporation (or parent
thereof) or to be replaced with a comparable option to purchase shares of the
capital stock of the successor corporation (or parent thereof), (ii) such option
is to be replaced with a cash incentive program of the successor corporation
which preserves the spread existing on the unvested option shares at the time of
the Corporate Transaction and provides for subsequent payout in accordance with
the same vesting schedule applicable to such option or (iii) the acceleration of
such option is subject to other limitations imposed by the Plan Administrator at
the time of the option grant. The determination of option comparability under
clause (i) above shall be made by the Plan Administrator, and its determination
shall be final, binding and conclusive.

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

            C. The Plan Administrator shall have the discretion, exercisable
either at the time the option is granted or at any time while the option remains
outstanding, to provide for the automatic acceleration of one or more
outstanding options (and the automatic termination of one or more outstanding
repurchase rights with the immediate vesting of the shares of Common Stock
subject to those rights) upon the occurrence of a Corporate Transaction, whether
or not those options are to be assumed or replaced (or those repurchase rights
are to be assigned) in the Corporate Transaction. The Plan Administrator shall
also have the discretion to grant options which do not accelerate whether or not
such options are assumed (and to provide for repurchase rights that do not
terminate whether or not such rights are assigned) in connection with a
Corporate Transaction.

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

            E. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such

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Corporate Transaction had the option been exercised immediately prior to such
Corporate Transaction. Appropriate adjustments to reflect such Corporate
Transaction shall also be made to (i) the number and/or class of securities
available for issuance under the Plan following the consummation of such
Corporate Transaction, (ii) the exercise price payable per share under each
outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same and (iii) the maximum number of securities
and/or class of securities for which any one person may be granted stock
options, separately exercisable stock appreciation rights and direct stock
issuances in the aggregate under the Plan.

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

            G. The Plan Administrator shall have full power and authority to
grant options under the Discretionary Option Grant Program which will
automatically accelerate in the event the Optionee's Service subsequently
terminates by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any Change
in Control. Each option so accelerated shall remain exercisable for fully-vested
shares until the earlier of (i) the expiration of the option term or (ii) the
expiration of the one (1)-year period measured from the effective date of the
Involuntary Termination. In addition, the Plan Administrator may provide that
one or more of the Corporation's outstanding repurchase rights with respect to
shares held by the Optionee at the time of such Involuntary Termination shall
immediately terminate, and the shares subject to those terminated repurchase
rights shall accordingly vest in full.

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

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

      IV. CANCELLATION AND REGRANT OF OPTIONS

      The Plan Administrator shall have the authority to effect, at any time and
from time to time, with the consent of the affected option holders and the
Corporation's stockholders, the cancellation of any or all outstanding options
under the Discretionary Option Grant Program (including outstanding options
incorporated from the Predecessor Plan) and to grant in substitution new options

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covering the same or different number of shares of Common Stock but with an
exercise price per share based on the Fair Market Value per share of Common
Stock on the new grant date.

      V. STOCK APPRECIATION RIGHTS

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

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

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

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

                        (iii) If the surrender of an option is rejected by the
            Plan Administrator, then the Optionee shall retain whatever rights
            the Optionee had under the surrendered option (or surrendered
            portion thereof) on the option surrender date and may exercise such
            rights at any time prior to the later of (a) five (5) business days
            after the receipt of the rejection notice or (b) the last day on
            which the option is otherwise exercisable in accordance with the
            terms of the documents evidencing such option, but in no event may
            such rights be exercised more than ten (10) years after the option
            grant date.

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

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

                        (ii) Upon the occurrence of a Hostile Take-Over, each
            such individual holding one or more options with such a limited
            stock appreciation right in effect shall have the unconditional
            right (exercisable for a thirty (30)-day period following such
            Hostile Take-Over) to surrender each such option to the Corporation,
            to the extent the option is at the time exercisable for vested
            shares of Common Stock. In return for the surrendered option, the
            Optionee shall receive a cash distribution from the Corporation in
            an amount equal to the excess of (a) the Take-Over Price of

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            the shares of Common Stock which are at the time vested under each
            surrendered option (or surrendered portion thereof) over (b) the
            aggregate exercise price payable for such shares. Such cash
            distribution shall be paid within five (5) days following the option
            surrender date.

                        (iii) Neither the approval of the Plan Administrator nor
            the consent of the Board shall be required in connection with such
            option surrender and cash distribution.

                        (iv) The balance of the option (if any) shall continue
            in full force and effect in accordance with the documents evidencing
            such option.

                                 ARTICLE THREE
                             STOCK ISSUANCE PROGRAM

      I. STOCK ISSUANCE TERMS

      Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.

            A. PURCHASE PRICE.

                  1. The purchase price per share shall be fixed by the Plan
Administrator, but shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the issuance date.

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

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

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

            B. VESTING PROVISIONS.

                  1. Shares of Common Stock issued under the Stock Issuance
Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program, namely:

                        (i) the Service period to be completed by the
            Participant or the performance objectives to be attained,

                        (ii) the number of installments in which the shares are
            to vest,

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                        (iii) the interval or intervals (if any) which are to
            lapse between installments, and

                        (iv) the effect which death, Permanent Disability or
            other event designated by the Plan Administrator is to have upon the
            vesting schedule,

shall be determined by the Plan Administrator and incorporated into the Stock
Issuance Agreement.

                  2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.

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

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

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

      II. CORPORATE TRANSACTION/CHANGE IN CONTROL

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

                                       11
<PAGE>

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

            C. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's cancellation rights remain outstanding under the Stock
Issuance Program, to provide that those rights shall automatically terminate in
whole or in part, and the shares of Common Stock subject to those terminated
rights shall immediately vest, in the event the Participant's Service should
subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Change in Control.

            D. The Plan Administrator shall have the discretion to provide for
cancellation rights with terms different from those in effect under Section
II.A. in connection with a Corporate Transaction.

      III. SHARE ESCROW/LEGENDS

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

                                  ARTICLE FOUR
                         AUTOMATIC OPTION GRANT PROGRAM

      I. OPTION TERMS

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

                  1. Each individual serving as a non-employee Board member on
the Underwriting Date was automatically granted, on the Underwriting Date, a
Non-Statutory Option to purchase 5,000 shares of Common Stock, provided such
individual has not previously been in the employ of the Corporation (or any
Parent or Subsidiary).

                  2. Each individual serving as a non-employee Board member on
June 19, 1997 shall automatically be granted, on such date, a Non-Statutory
Option to purchase 5,000 shares of Common Stock, provided such individual has
not previously been in the employ of the Corporation (or any Parent or
Subsidiary) and has served as a non-employee Board member for at least six (6)
months.

                  3. Each individual who is first elected or appointed as a
non-employee Board member after the Underwriting Date shall automatically be
granted, on the date of such initial election or appointment, a Non-Statutory
Option to purchase 30,000 shares of Common Stock,

                                       12
<PAGE>

provided such individual has not previously been in the employ of the
Corporation (or any Parent or Subsidiary).

                  4. On the date of each Annual Stockholders Meeting held after
the Underwriting Date, each individual who is to continue to serve as an
Eligible Director, shall automatically be granted a Non-Statutory Option to
purchase an additional 20,000 shares of Common Stock, provided such individual
has served as a non-employee Board member for at least six (6) months. There
shall be no limit on the number of such 20,000-share option grants any one
Eligible Director may receive over his or her period of Board service.

            B. EXERCISE PRICE.

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

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

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

            D. EXERCISE AND VESTING OF OPTIONS. Each option shall be immediately
exercisable for any or all of the option shares. However, any shares purchased
under the option shall be subject to repurchase by the Corporation, at the
exercise price paid per share, upon the Optionee's cessation of Board service
prior to vesting in those shares. Each initial 30,000-share option grant made to
a newly elected or appointed non-employee Board member shall vest, and the
Corporation's repurchase right with respect to the option shares shall lapse, in
a series of four (4) successive equal annual installments over the Optionee's
period of continued service as a Board member, with the first such installment
to vest upon the Optionee's completion of one (1) year of Board service measured
from the option grant date. Each of the 5,000-share option grants made to the
non-employee Board members on June 19, 1997 shall vest, and the Corporation's
repurchase right with respect to the option shares shall lapse, in a series of
four (4) successive equal annual installments over the Optionee's period of
continued service as a Board member, with the first such installment to vest
upon the Optionee's completion of one (1) year of Board service measured from
the Underwriting Date. Each annual 20,000-share option grant made to continuing
non-employee Board members shall vest, and the Corporation's repurchase right
with respect to the option shares shall lapse, upon the Optionee's completion of
one (1) year of Board service measured from the option grant date.

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

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

                                       13
<PAGE>

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

                        (iii) Should the Optionee cease to serve as a Board
            member by reason of death or Permanent Disability, then all shares
            at the time subject to the option shall immediately vest so that
            such option may, during the twelve (12)-month exercise period
            following such cessation of Board service, be exercised for all or
            any portion of those shares as fully-vested shares of Common Stock.

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

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

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

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

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

                                       14
<PAGE>

            D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
payable for such securities shall remain the same.

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

      III. REMAINING TERMS

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

                                  ARTICLE FIVE
                                  MISCELLANEOUS

      I. FINANCING

            A. The Plan Administrator may permit any Optionee or Participant
(other than a Section 16 Insider) to pay the option exercise price under the
Discretionary Option Grant Program or the purchase price for shares issued under
the Stock Issuance Program by delivering a promissory note payable in one or
more installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion. Promissory notes may be authorized with or without
security or collateral. In all events, the maximum credit available to the
Optionee or Participant may not exceed the sum of (i) the aggregate option
exercise price or purchase price payable for the purchased shares plus (ii) any
Federal, state and local income and employment tax liability incurred by the
Optionee or the Participant in connection with the option exercise or share
purchase.

            B. The Plan Administrator may, in its discretion, determine that one
or more such promissory notes shall be subject to forgiveness by the Corporation
in whole or in part upon such terms as the Plan Administrator may deem
appropriate.

      II. TAX WITHHOLDING

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

            B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan (other than the options granted or the shares issued under the Automatic
Option Grant Program) with the right to use shares

                                       15
<PAGE>

of Common Stock in satisfaction of all or part of the Taxes incurred by such
holders in connection with the exercise of their options or the vesting of their
shares. Such right may be provided to any such holder in either or both of the
following formats:

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

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

      III. EFFECTIVE DATE AND TERM OF THE PLAN

            A. The Plan became effective with respect to the Discretionary
Option Grant and Stock Issuance Program on the Plan Effective Date. The
Automatic Option Grant Program became effective on the Underwriting Date.

            B. The Plan shall serve as the successor to the Predecessor Plan,
and no further option grants shall be made under the Predecessor Plan after the
Section 12(g) Registration Date. All options outstanding under the Predecessor
Plan as of such date shall be incorporated into the Plan at that time and shall
be treated as outstanding options under the Plan. However, each outstanding
option so incorporated shall continue to be governed solely by the terms of the
documents evidencing such option, and no provision of the Plan shall be deemed
to affect or otherwise modify the rights or obligations of the holders of such
incorporated options with respect to their acquisition of shares of Common
Stock.

            C. One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Corporate Transactions and Changes in Control, may, in the Plan
Administrator's discretion, be extended to one or more options incorporated from
the Predecessor Plan which do not otherwise contain such provisions.

            D. The Plan shall terminate upon the earliest of (i) April 29, 2006,
(ii) the date on which all shares available for issuance under the Plan shall
have been issued pursuant to the exercise of the options or the issuance of
shares (whether vested or unvested) under the Plan or (iii) the termination of
all outstanding options in connection with a Corporate Transaction. Upon such
Plan termination, all outstanding options and unvested stock issuances shall
continue to have force and effect in accordance with the provisions of the
documents evidencing such options or issuances.

      IV. AMENDMENT OF THE PLAN

            A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects. However, no such amendment
or modification shall

                                       16
<PAGE>

adversely affect any rights and obligations with respect to options, stock
appreciation rights or unvested stock issuances at the time outstanding under
the Plan unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
pursuant to applicable laws and regulations.

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

      V. USE OF PROCEEDS

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

      VI. REGULATORY APPROVALS

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

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

      VII. NO EMPLOYMENT/SERVICE RIGHTS

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

                                       17
<PAGE>

                                    APPENDIX

      The following definitions shall be in effect under the Plan:

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

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

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

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

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

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

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

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

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

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

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

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

                                       18
<PAGE>

I. DOMESTIC RELATIONS ORDER shall mean any judgment, decree or order (including
approval of a property settlement agreement) which provides or otherwise
conveys, pursuant to applicable State domestic relations laws (including
community property laws), marital property rights to any spouse or former spouse
of the Optionee.

J. ELIGIBLE DIRECTOR shall mean a non-employee Board member eligible to
participate in the Automatic Option Grant Program in accordance with the
eligibility provisions of Article One.

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

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

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

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

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

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

N. HOSTILE TAKE-OVER shall mean a change in ownership of the Corporation
effected through the following transaction:

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

                                       19
<PAGE>

            (ii) more than fifty percent (50%) of the securities so acquired are
      accepted from persons other than Section 16 Insiders.

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

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

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

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

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

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

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

T. OPTIONEE shall mean any person to whom an option is granted under the
Discretionary Option Grant or Automatic Option Grant Program.

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

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

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

                                       20
<PAGE>

member by reason of any medically determinable physical or mental impairment
expected to result in death or to be of continuous duration of twelve (12)
months or more.

X. PLAN shall mean the Corporation's 1996 Stock Option/Stock Issuance Plan, as
set forth in this document.

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

Z. PLAN EFFECTIVE DATE shall mean April 30, 1996, the date on which the Plan was
adopted by the Board.

AA. PREDECESSOR PLAN shall mean the Corporation's 1995 Stock Option Plan.

BB. PRIMARY COMMITTEE shall mean the committee of two (2) or more non-employee
Board members appointed by the Board to administer the Discretionary Option
Grant and Stock Issuance Programs with respect to Section 16 Insiders.

CC. QUALIFIED DOMESTIC RELATIONS ORDER shall mean a Domestic Relations Order
which substantially complies with the requirements of Code Section 414(p). The
Plan Administrator shall have the sole discretion to determine whether a
Domestic Relations Order is a Qualified Domestic Relations Order.

DD. SECONDARY COMMITTEE shall mean a committee of two (2) or more Board members
appointed by the Board to administer the Discretionary Option Grant and Stock
Issuance Programs with respect to eligible persons other than Section 16
Insiders.

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

FF. SECTION 12(G) REGISTRATION DATE shall mean the first date on which the
Common Stock is first registered under Section 12(g) of the 1934 Act.

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

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

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

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

                                       21
<PAGE>

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

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

MM. TAXES shall mean the Federal, state and local income and employment tax
liabilities incurred by the holder of Non-Statutory Options or unvested shares
of Common Stock in connection with the exercise of those options or the vesting
of those shares.

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

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

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

                                       22